How do annuities work(i.e whole life annuities)?My auntie put £100,000 into an annuity which pays her £12,000 a year.That equates to 8 and a bit years,but suppose my auntie lives for another 30 years.Surely the annuity company will lose a lot of dosh over these years,or does the annuity company just hope that auntie drops down dead tomorrow?
A 12% rate seems to be extremely generous but what you've not told us is how old your aunt is. If you receive an annuity at 60 you'll get a fairly low rate (because the provider will probably have to keep on paying out for many years), whereas if you receive an annuity at 70 you'll get a better rate.
12% is more than double the best rates for people receiving an annuity from the age of 65, so (unless there's been an error somewhere), it seems likely that your aunt didn't start receiving her annuity until she was significantly older than that.
Auntie is not in the best of health.If she drops dead tomorrow,the assurance company wins.If auntie lives till she is a 100 years old the company will lose£360,000 pounds.A bit of a hit for them.
Auntie is 60 years old and the money she used was her own money.Will she still get pension money when she hits 65?She has worked off and on(more off)all her life.By the way i have seen her bank statements and yes she does get £1000 per month.Why do i know?I challenged her about it and she showed me her statements.
It may also be that it is a fixed annuity which remains the same , i.e. it is not index linked . So if she does survive another 30 years she will still get £12000pa which by then might only be worth around £5000pa in today's money.
But the main reason it's so generous must be for the reason Buenchico says.
For state pension, she should get a state pension forecast off gov.uk
Depends how long you want to spread your £100000 over. If you want to blow it over 4 years that's a little under £500 pw. But after that you'll have nothing left apart from state pension for what could be 30 years.
It's a great deal as far as annuities go.
Looks like it might be an impaired life policy then.If auntie gets past 8 years,she wins.If she doesnt survive the next couple of years the assurance company wins.
I assume, tony, you took it quite early-perhaps at age 60 or earlier and have index linking and maybe some spouse benefits. It certainly shows how remarkably good ynnafymmi's auntie's plan seems, (despite the OP thinking one minute it's nowhere near enough and in the next breath thinking the annuity company could lose loads of dosh)
>If auntie gets past 8 years,she wins.
Yes, if people on their last few weeks of life get their calculator out. On the other hand she had peace of mind for most of that time knowing she had a decent guaranteed income for however long she lives