Getting a private pension in Euro

[Albert the InfoGipsy]

Not really French finance, but couldn't think where else to try.

I'll be cashing in a couple of private pension funds sometime soonish. Ideally I'd like to use the proceeds to buy a pension in Euro -- does anyone know if this is feasible and whether the returns would be so much worse that I'd be better off staying with sterling. I've got other income already in GBP so this would be a way of having an each-way bet on currency fluctuations.

A second question for any actuaries or the like is: generally speaking do you get a better deal on an annuity when interest rates are higher? It seems logical, but as annuities are long-term deals I don't know what affects the return, apart from personal (age, etc) factors that I can't do anything about. I suppose the question is: should I wait for the B of E to up interest rates, as a lot of pundits expect?

 

[united]

Albert part 2 first. If the assets backing the annuity give a improving rate of return then this can be reflected in improved annuity rates, Typical assets would be gilts both conventional & index linked along with investment grade bonds. I think rates have improved recently for level annuities but I am not certain about index linked annuities (because of the current inflation risk). Downward pressure is exerted by us all living longer although this can be offset with some providers who offer better rates if health is not 100%.

Re the Euro I remember so years ago a pension provider offered what it called asset backed annuities which provided X units of their investment funds (eg UK Equities, Property etc) per annum, depending on age. The supposed attraction was that the value of the units would increase over time an could provide a better return than the more expensive index linked or escalating annuity so if these are still available and a provider has a Euro designated fund it may be be available.

I am not a Financial Adviser but I have read about the huge variety of options now available drawdown, phased retirement, a whole raft of different annuities and the QROPS this is Qualifying Recognised Overseas Pension Schemes under which after 5 years the proceeds can be taken out in one lump sum with beneficial tax rates.

I try and keep upto date on these issues from a personal interest point of view but would always seek good quality professional advice, with an annuity you cannot change your mind a few years down the line.

 

[Albert the InfoGipsy]

Thanks, United. I'll now try to understand what you wrote! [8-)]

"some providers who offer better rates if health is not 100%." So I might get some benefit out of my iffy heart?

I had a set of illustrations from the Pru for various annuity packages and taking a pension that increases by 3% p/a meant starting with a MUCH smaller income. I think it worked out to be 15 years before the payment got back up to the equivalent of a level pension, and another 15 before the total received matched the level pension, all based on the same pot.

[Benjamin]

This doesn't answer your question on €uro pensions but it expands a bit on united's response where he mentions drawdown (more commonly called income drawdown).

Google it, but basically it is a way of drawing income from a pension fund without purchasing an annuity. As the highest level of income allowed is very close to today's annuity rates (6%?), although with poor investment returns you could be eating into capital, it can be a bit of a nobrainer. The downside of it is you need a minimum pot of circa £100K, but rather than cashing small policies one at a time you can always draw together a series of policies to give the minimum pot required.

As ever sound professional advice is required.

[united]

Albert,

Sorry if I lacked clarity. Yes depending on how iffy your heart is you could get a better rate. These are generally known as impaired life annuities not all companies offer them.

Re your 3% increase it does show what a complex issue it can be. If only we knew the date we pop our clogs!

I stick with my point about quality advice. I try and keep upto date so I can assess if an adviser knows as much as me I then know he/she is not what I want.

I did a quick google on impaired  life annuities there do seem to be a few companies offering comparison services that may be worth a look.

good luck

[Albert the InfoGipsy]

United,

No problem with your clarity. More a problem with the complexity of the subject!

I agree about the need for specialist advice, but asking questions here often helps to find out what I need to ask the experts.

[AnOther]

Whoever holds your pot or pots of money are obliged to inform you of the 'Open Market Option' whereby you can take your money wherever you like to buy an annuity and not neccessarily accept what they themselves offer you. In the great majority of cases it is very likely that it would be be in most peoples interest to do so but scandalously they frequently hide this information in the small print or worse, neglect to give it at all. I can think of no other logical reason why something like 60 or 70% of those taking an annuity still do so through the same company which is holding their pot, potentially to their financial detriment for the rest of their lives.

Have a look HERE for an illustration of the potential differentials.

As for Impaired Health Annuities, here they are not obliged to ask you if you are in ill health of have a reduced life expectancy for any reason, you have to know to ask.

QROPS look very interesting and I am going to look very seriously into them. A QROPS could quite possibly fulfil your wish for a fund in Euros but in essence you won't be able to reap the full benefits until you had been non UK resident for 5 years.

Quote from HMRC

"Under regulation 3(3) of SI 2006/208 a QROPS will not have to report to HMRC a payment (or a deemed payment) if the member is not tax resident in the UK when the payment is made and has neither been UK resident in that tax year nor in any of the previous five tax years. But a QROPS will need to check on the position when a payment is made as the member could have become UK resident again after a period of non-residence"

Still working and having a few years to go before retirement gives me the luxury to take a little time to do my research.

Bet you've got a headache now [Www]

[Albert the InfoGipsy]

Cheers, ErnieY.

Both my potholders (!) have notified me of the open market option. I'm really just using their offers as a baseline. QROPS do look interesting -- I noticed your original post on the matter. I need to work out if I can afford to move to france for 5 years before taking my pensions. It would mean working for longer than I'd like to although, at least in theory, I could keep working in France.

[AnOther]

[quote user="Albert the InfoGipsy"]I need to work out if I can afford to move to france for 5 years before taking my pensions. It would mean working for longer than I'd like to although, at least in theory, I could keep working in France.[/quote]Sounds similar to me then although I've already made the move of course.

Any time working is longer than I'd like - in theory AND practice [:'(]