Buying a UK annuity

[ClubMan]

Sounds like you have it a bit mixed up there. You can only put funds into an ARF that have come from a pension fund, and that pension fund would have paid the tax-free lump sum. There's no tax advantage to multiple ARFs. However, your strategy would work with multiple PRSAs.

Exactly. What I was trying to say but much clearer.

 

[Allpartied]

Ireland is a very small country. We are not going to have the same financial products of other, much bigger countries who have the economies of scale. The UK is 12 times bigger than Ireland. That means they can do a lot more than we can.


Steven
www.bluewaterfp.ie

I do admire your dogged defence of the Irish Financial sector, but these products are available in Denmark and Iceland, among other similar sized countries.
Its just laziness and corporate greed, without any sense of social responsibility that allows Irish financial institutions to rinse people.
And the government's laissez faire oversight.

 

[Freelance]

The solution would be for the state to step in and offer fixed term annuities in the form of a State Bond. Very easy to manage with the current state savings infrastructure and would be quite popular, I think.

I think that’s an excellent suggestion. Simple, elegant, easily understood, devoid of the needless complexity and jargon that the pension industry inflicts on us, and potentially devoid of the snouts in the trough.

It hasn’t a hope of being implemented !!

 

[Fortune]

I do admire your dogged defence of the Irish Financial sector, but these products are available in Denmark and Iceland, among other similar sized countries.
Its just laziness and corporate greed, without any sense of social responsibility that allows Irish financial institutions to rinse people.
And the government's laissez faire oversight.

I've just glanced at Revenue's pension manual and they say that pensions are to be non-commutable and not capable of being surrendered. That would rule out a term annuity. I believe they were sold by some providers in Ireland decades ago, but weren't available for pension fund benefits.

 

[JimmyB99]

I've just glanced at Revenue's pension manual and they say that pensions are to be non-commutable and not capable of being surrendered. That would rule out a term annuity.

Cen fáth?

 

[Fortune]

Cen fáth?

Because the term annuity would hand the funds back at the end of the term. That would be a surrender of the annuity, which is against the rules.

 

[Freelance]

The usual answer to such questions is “Because the relevant legislation doesn’t allow it”

 

[JimmyB99]

Because the term annuity would hand the funds back at the end of the term. That would be a surrender of the annuity, which is against the rules.

NO! A term annuity uses up the full purchase price! The idea being that someone, say at age 55, who opts for a 10 year term annuity until would end up with a much higher annuity for the 10 years to follow than an annuity payable for life.

 

[Donal O'Keeffe]

Sounds like you have it a bit mixed up there. You can only put funds into an ARF that have come from a pension fund, and that pension fund would have paid the tax-free lump sum. There's no tax advantage to multiple ARFs. However, your strategy would work with multiple PRSAs.

Yes, it is PRSAs I'm referring to. I said "ARF type products" because I couldn't recall the name of that investment product.

 

[Fortune]

NO! A term annuity uses up the full purchase price! The idea being that someone, say at age 55, who opts for a 10 year term annuity until would end up with a much higher annuity for the 10 years to follow than an annuity payable for life.

Yes, but the whole annuity is gone in 10 years. It is not the pension for life that the legislation requires.

 

[JimmyB99]

Yes, but the whole annuity is gone in 10 years. It is not the pension for life that the legislation requires.

Two probs with this.

1. You are now contradicting yourself, as in:

Because the term annuity would hand the funds back at the end of the term. That would be a surrender of the annuity, which is against the rules.

2. You're just making things up now - where, in legislation, does it say that an annuity needs to be for life?

 

[Fortune]

Two probs with this.

1. You are now contradicting yourself, as in:


2. You're just making things up now - where, in legislation, does it say that an annuity needs to be for life?

Where is the contradiction? After 10 years, all the funds have been given back to the annuitant, contrary to the regulations.


Section 772(3)(f) of the Taxes Consolidation Act 1997 states that the annuity must be paid for life. Revenue's pension manual also sets out the pension for life in sections 6.3 and 6.4, and likely in other chapters.

 

[cremeegg]

One theory of mine is that the sudden drop in Stg. value that happened in 2016 will recover over time.... making pension payments in Stg. more valuable. But that's all by the by.....

What sudden drop ? Sterling was worth a bit less than €1.20 from 2008 until 2014, between 2014 and 2016 it was much stronger, since 2016 it has been worth a bit less than €1.20.

I have no idea what the value of sterling will be in the future, but all that happened in 2016 was that a brief (2 year) period of high valuation against the Euro was reversed.

Between the launch of the Euro in 1999 and 2007 sterling was worth over €1.40 it fell in 2007/2008 to €1.20 and except for the 2 year period mentioned it has stayed there since.

 

[Kev1964]

What sudden drop ? Sterling was worth a bit less than €1.20 from 2008 until 2014, between 2014 and 2016 it was much stronger, since 2016 it has been worth a bit less than €1.20.

I have no idea what the value of sterling will be in the future, but all that happened in 2016 was that a brief (2 year) period of high valuation against the Euro was reversed.

Between the launch of the Euro in 1999 and 2007 sterling was worth over €1.40 it fell in 2007/2008 to €1.20 and except for the 2 year period mentioned it has stayed there since.

What sudden drop? The one in June 2016 after Brexit.
Who can say that in the absence of Brexit it would now be the same or even higher...?
And even post Brexit ….and by the time I’m drawing a sterling pension the exchange rate might be better still.

 

[Protocol]

Between the launch of the Euro in 1999 and 2007 sterling was worth over €1.40 it fell in 2007/2008 to €1.20 and except for the 2 year period mentioned it has stayed there since.

Here is the ECB chart:

 

[Protocol]

The other way around:

 

[Dr Strangelove]

it's often an advantage to spread one's pension investments across a number of currencies, say, USD, CHF, Euro and GBP.

I have to say the idea at age 85 of managing pension income in four currencies (with regard to tax and other unavoidable administration ) does not appeal.

 

[Donal O'Keeffe]

I have to say the idea at age 85 of managing pension income in four currencies (with regard to tax and other unavoidable administration ) does not appeal.

A good reason for having pension investments outside Ireland is tax management and also avoiding the incredibly high fees charged by the Irish financial sector. Here's an example; if one were to trade €10,000 worth of shares through an Irish stock broker the fees would be perhaps €200, the same made by the overseas based stock broker which I use will cost €4.50, yes the difference is that big €4.50 rather than €200. In general, fees charged by Irish financial institutions are stratospheric, they consume a large portion of the growth of pension investments. A good plan is "Money earned overseas stays overseas", (in the right countries of course), and can be spend there when getting away from the Irish winter. This reduces income needed in Ireland, and therefore income tax.

 

[ClubMan]

In general, fees charged by Irish financial institutions are stratospheric, they consume a large portion of the growth of pension investments.

Not if you buy and hold for the long term.