Annuities and my special circumstances

Charity_Dalek

EdInvestor wrote: »

This is why you should IMHO consider drawdown where you can draw the max income while you are around to enjoy it, and then your wife can convert the pot to an annuity later when she is older and can get better value. [/font][/color]

I investigated Drawdown today. Whilst there are some advantages, there is risk if the markets fail to perform. Being a conservative individual and being fairly paraniod about the next 8 years to retirement, I think I might rather have the money in my or wifes hand at 60 (so to speak).

However, a lot can change in the next 8 years.

EdInvestor

Charity_Dalek wrote: »

I investigated Drawdown today. Whilst there are some advantages, there is risk if the markets fail to perform.

The risk of drawdown depends on how you invest the money (gilts,cash are not risky) and how much income you take and spend as opposed to reinvest outside the pension wrapper.

It is not a requirement to invest the money in the stockmarket. You can take no income at all if you so choose.

What is your pension invested in now, BTW?

Charity_Dalek

EdInvestor wrote: »

The risk of drawdown depends on how you invest the money (gilts,cash are not risky) and how much income you take and spend as opposed to reinvest outside the pension wrapper.

It is not a requirement to invest the money in the stockmarket. You can take no income at all if you so choose.

What is your pension invested in now, BTW?

I see your point and yes that does have a different perspective. I will have to look into this again.

As to the pension, a while ago I was in low risk options such as bonds and a few equities. But in view of poor performace they are all now higher risk equities. Just trying to boost the pot prior to retirement.

Is it possible for you to say what sensible Drawdown values would be. I tried to look today, but found no tables.

EdInvestor

Charity_Dalek wrote: »

sensible Drawdown values

Sorry, not sure what you mean.

Charity_Dalek

EdInvestor wrote: »

Sorry, not sure what you mean.

I was hoping for some guidance on what a 300k pot in 2016 might yield in terms of pa income for a low risk person.

EdInvestor

If you invested it say one third cash, one third gilts/high quality corporate bonds and one third high quality blue chip dividend paying shares/commercial property funds *, holding all directly in a low cost SIPP( so very few charges to pay) in normal times you ought to be able to take an income of at least 5% without touching the capital, more if you want to chip into it.

Some drawdowners prefer to take the maximum out of the plan every year and reinvest unneeded income in another tax free environment (eg an ISA or N&SI index linked). Of course it can also be given away IHT free with no restrictions.
This is seen as less risky than keeping the money in the pension where it is subject to changes in regulations.

*Even low risk people should hold a percentage of their portfolio in shares and/or property funds so as to keep up long term with inflation. What tends to spook people is that advisors put far too higher a proportion of their portfolio into risk assets when they should usually be max 35-40% at risk and 60% in cash.This is because the advisor makes no money from the cash bit. The net result is it frightens people away from investing as they perceive it to be entirely high risk.Thus they end up exposed to the dead certainty that inflation will erode their capital and purchasing power long term.