Annuity and RPI

cavework

Thanks Mike, this time I am seriously looking at the optimum payback for my husbands investments as this is the last chance we have and we have made some very wrong decisions in the past which have cost us a huge amount of money, I will not let this happen again.
Thanks for the links and as Ed advised , this time we will not jump in , blindly and put all our trust in one FA's opinion just because we are in a state of panic.
If we take it,we won.t invest the higher annuity at least for the first 2years maybe longer as we need it as an income.
Our FA has recomended drawdown rather than annuity, but we really need security of a guaranteed monthly income now as it will pay the rent when we sell our home . and as the drawdown will reduce the pension pot .. in 5 months time we could be worse off than opting for the level annuity now as the pot will be reduced?
Hope this makes sense

EdInvestor

A further thing that needs to be looked at is tax, given that you will both still be working and just on the ordinary personal allowances (which willl of course go up substantially at age 65) .Being locked into a fairly high fixed annuity amount of taxable income may not be the optimal solution here -it would be bettter if you could vary the non-employment income (as you can with drawdown) every year to take account of earnings and tax variations so as to conserve and rebuild the drawdown pot.

There is a lot of fine tuning that can be done with your situation which can help quite a lot.:) You have done the right thing by gettting a grip on the issues now.

jamesd

cavework, if the money was invested via income drawdown a reasonable income percentage to expect is 6% of capital, £6960 a year, forever, maintaining value with inflation. For shorter terms 8% or higher can be taken, £9280 a year, with risk of reduction in capital value. Limited by the GAD drawdown calculation but I don't think that limit will apply here.

At the moment annuity rates are depressed in part by quantititative easing so using income drawdown for a few years then planning to buy an annuity at a greater age may be a better idea.

For your own income, it's worth considering that a pension pot that is in income drawdown can be inherited by a spouse, so it's not lost if you don't get a guarantee or dual life pension. Given your age difference it may well be the best solution to the problem.