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Post by Fletchsmile on Aug 1, 2017 11:57:35 GMT 7
Annuity rates still look poor to me, even after picking up recently. I appreciate some people want the certainty they provide. But for me surrendering a pot of GBP 100k at aged 65 in return for an income for "life" of 4k+ to 5k+ doesn't appeal at all. 4% to 5% p.a. but give up your capital. I'd much rather manage an investment portfolio myself and draw 4% to 5% a year income while keeping the capital. If it's in a SIPP, then these days the capital can also often be passed on to your heirs free of inheritance tax (if you die before age 75) Getting a joint life annuity that carries on paying a % to your wife after your death might provide some additional security/comfort. It's worth a though knowing people cant touch it, but the rate will be lower still. ============================================== Annuity rates back above pre-referendum levelsAnnuity rates have been resurgent in recent weeks. Ten rate increases since the beginning of May have helped push rates for a 65-year-old back above pre-EU referendum levels. www.hl.co.uk/news/articles/annuity-rates-back-above-pre-referendum-levels
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AyG
Crazy Mango Extraordinaire
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Post by AyG on Aug 1, 2017 12:56:49 GMT 7
It's not an "either/or" situation. One can sensibly hold both an annuity and an investment portfolio. Wade Pfau published an article earlier this week about the framework his pension advisory firm uses. Assets are divided into three buckets: Reliable Income, the Diversified Portfolio, and Reserves. Annuities fall into the first bucket, along with social security and pensions. Various factors affect how much one ought allocate to this bucket, including longevity. So, for many people (particularly those without decent pensions) annuities may well form part of the solution; an investment portfolio just doesn't carry the certainty of income that an annuity can provide. Anyway, the article's well worth a read, despite the slight American bias. It's at: retirementresearcher.com/assets-liabilities-fit-retirement-income-framework-2
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Post by Fletchsmile on Aug 1, 2017 17:23:31 GMT 7
Looks like a typical US sales pitch: overly long article to state the obvious, so they can move to the next step of "work together to analyse the possibilities. Plus a disclaimer longer than the article itself In modern times, these things don't need to be either/or, but with such poor annuity rates it really does swing the pendulum further away from that traditional route, and reduce attractiveness as part of that wider solution.
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Post by rgs2001uk on Aug 1, 2017 21:21:29 GMT 7
Why would anyone even consider an annuity?
On a similar vein.
I have a pension that will kick in at 65, I have the option of taking a reduced pension at age 60, I will lose 4% per year, so at age 60 I will get 80%.
Keeping it simple, lets assume I will be paid 4,000 quid per year from age 60, after 25 years I will have received 100k quid. Or from age 65 get 5,000 quid per year, after 20 years will have received 100 k quid.
I am inclined to take the reduced pension at age 60.
As mentioned before, I dont need the pension income, I made my own arrangements. The pension will be for my wifes benefit, she will receive half of the pension, til she dies. Not mentioned another pension that will kick in at age 60. Its not as if the mrs will be short of a bob or two.
Not mentioned, I havent paid NI in years, and have no interest in a UK OAP.
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Post by Fletchsmile on Aug 2, 2017 10:51:33 GMT 7
Annuities will also contribute to the long term wealth gap similar to how low interest rates have hit savers. With rates so low there'll be a stronger correlation for the poorer elements of society being the ones who need to choose them and have less options as they don't want to/ can't take the risk/uncertainty of better returns. Result: the money they've accumulated over the years buys an annuity, and so disappears ensuring no pot is passed on to their descendants to give them a better start in accumulating wealth. Result: the wealth gap widens further down the generations
Best to put yourself in the situation where you can realise the poor value of annuity rates and aren't forced to take them through necessity/ need for certainty
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Post by Fletchsmile on Aug 2, 2017 11:05:34 GMT 7
Why would anyone even consider an annuity? On a similar vein. I have a pension that will kick in at 65, I have the option of taking a reduced pension at age 60, I will lose 4% per year, so at age 60 I will get 80%. Keeping it simple, lets assume I will be paid 4,000 quid per year from age 60, after 25 years I will have received 100k quid. Or from age 65 get 5,000 quid per year, after 20 years will have received 100 k quid. I am inclined to take the reduced pension at age 60. As mentioned before, I dont need the pension income, I made my own arrangements. The pension will be for my wifes benefit, she will receive half of the pension, til she dies. Not mentioned another pension that will kick in at age 60. Its not as if the mrs will be short of a bob or two. Not mentioned, I havent paid NI in years, and have no interest in a UK OAP. I have a small UK company pension like that too. It originally kicks in at 60 and I was originally looking forward to taking it at 50 and accepting a 40% discount. Same 4% a year. Then the government shifted the age to 55 making it longer for me to get my own money. Barstewards. One of the first times I started getting very disillusioned with UK pensions. Even if just left in cash and kept simple it would be an extra 20k in your example on the day you start receiving your 4k instead of 5k. Again simplifying you could take 1k a year for the next 20 to top up. Reality though is you should be able to earn more from investments My thinking on mine just to take it as soon as possible. If the cash is not needed then it can be invested elsewhere. My dad didn't live much belong retirement age and I'm mindful of the money he lost on annuity rates and the poor value the state pension scheme became because of an early demise. The main reason for waiting I could see in my situation would be my wife. As long as I'm around the pension won't be really needed as I'm comfortable with investing. If I die though she's not so hot on investments and would likely need to be more cautious and generate lower returns from money. Plus there's all sorts of people that may come calling for money from family, friends and relatives to financial advisors. A higher small pension (and even annuity) would provide more certainty for my wife and no-one can touch it, as there's no lump sum to get at. That's the main reason that might be relevant in our case. Not sure it will be a strong enough one to swing the decision, but I'll wait to nearer the time when we have to make it
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