Question
As a UK resident do I have to purchase an annuity from a UK based provder?
I understand that annuity rates are low in part because The Bank of England interest rates are low due to quantitative easing. However if we could shop for an annuity in another financial centre e.g Germany, Australia, Hong Kong then surely we would not be so adversly affected the BOE's interferrance in the markets.Answer
The simple answer is yes, you must buy your pension annuity from a UK provider.
If you decide to buy an annuity from an insurer other than your existing pension provider then your pension is effectively transferred into their pension scheme and the annuity then purchased. Because your pension must remain within a UK registered scheme it follows the annuity must, by default, too.
There is theoretically an alternative called Qualifying Recognised Overseas Pension Schemes (QROPS), which are overseas pension schemes allowed to accept transfers from UK schemes. They can sometimes make sense for individuals looking to move or retire overseas (so pension can be in local currency), but reports suggest cowboy financial advisers have been flogging these to expatriates like wildfire (and pocketing vast sales commissions in the process) regardless of suitability. They are not available to UK residents and, even if they were, your annuity would be in a foreign currency which presents its own risks and hassles.
The reason annuity rates are relatively low is rising gilt prices - as insurers use gilts to back annuities.
As you point out, low interest rates have been a factor (as it makes gilts look more attractive, pushing up demand hence prices). Rising demand from nervous investors (primarily big institutions and pension funds) in the wake of volatile markets is also to blame, as is quantitative easing - whereby the Bank of England attempts to pump money into the economy by buying gilts from the market (reducing gilt supply).
Instead of buying an annuity you are allowed to leave your pension fund invested and draw an income instead. Income drawdown provides a lot of flexibility and you can still use the pension fund to buy an annuity in future, but investment risk means you could run out of money before you die - unlike an annuity.
As a UK resident do I have to purchase an annuity from a UK based provder?
I understand that annuity rates are low in part because The Bank of England interest rates are low due to quantitative easing. However if we could shop for an annuity in another financial centre e.g Germany, Australia, Hong Kong then surely we would not be so adversly affected the BOE's interferrance in the markets.Answer
The simple answer is yes, you must buy your pension annuity from a UK provider.
If you decide to buy an annuity from an insurer other than your existing pension provider then your pension is effectively transferred into their pension scheme and the annuity then purchased. Because your pension must remain within a UK registered scheme it follows the annuity must, by default, too.
There is theoretically an alternative called Qualifying Recognised Overseas Pension Schemes (QROPS), which are overseas pension schemes allowed to accept transfers from UK schemes. They can sometimes make sense for individuals looking to move or retire overseas (so pension can be in local currency), but reports suggest cowboy financial advisers have been flogging these to expatriates like wildfire (and pocketing vast sales commissions in the process) regardless of suitability. They are not available to UK residents and, even if they were, your annuity would be in a foreign currency which presents its own risks and hassles.
The reason annuity rates are relatively low is rising gilt prices - as insurers use gilts to back annuities.
As you point out, low interest rates have been a factor (as it makes gilts look more attractive, pushing up demand hence prices). Rising demand from nervous investors (primarily big institutions and pension funds) in the wake of volatile markets is also to blame, as is quantitative easing - whereby the Bank of England attempts to pump money into the economy by buying gilts from the market (reducing gilt supply).
Instead of buying an annuity you are allowed to leave your pension fund invested and draw an income instead. Income drawdown provides a lot of flexibility and you can still use the pension fund to buy an annuity in future, but investment risk means you could run out of money before you die - unlike an annuity.
Read this Q and A at http://www.candidmoney.com/questions/question686.aspx
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