The big R cometh

zygurat789

QUOTE DunstonH from another thread

Also, pensions are not lost if you die early. The full fund value is paid out to your nominated beneficiary if you die before retirement. If you die after retirement it will depend on the options you choose to include (i.e. spouse protection, value protection (return of capital minus withdrawals)or guarantee periods or if you use income drawdown etc.

Just to prove my point, here we are posted elsewhere but never mentioned when he posted, somewhat dismissively, to my thread.

bogeysmum

Can we get back to the topic here? This seemingly innocent question seems to have dissolved into a slanging match.

- Spouse protection - If your pension fund includes protected rights (funds build up from DSS contributions received as a result of contracting-out of what was SERPS now the Second State Pension) and you are married, then by law you have to purchase an annuity that includes 50% spouse's pension and a 5-year guarantee period.

- A spouse's pension means that if you die before your spouse, your annuity could continue to be paid to them until they die, at a pre-determined percentage of the annuity you were receiving (usually 50%, 67% or 100%). Although this is a valuable benefit for your spouse, it would reduce the initial amount of annuity paid to you.

- Instead of OR as well as a spouse's pension you can include a guarantee period (usually 5 or 10 years although you can pick anything up to 10 years). This means that if you die during the guarantee period your annuity would continue to be paid (to a dependent or your estate) for the remainder of the guarantee period. For example, if you had a 10 year guarantee and died after 4 years, the remaining 6 years' worth of income would be paid to your spouse or estate. If you do not have a spouse or financial dependent, the annuity provider would probably make a lump sum payment to your estate instead in order to discharge their liability. You need to watch out for this sometimes, as it can be potentially liable for inheritance tax.

- Value protection is a relatively new feature that has been available since 6th April 2006. Value protection represents a return of original capital less annuity payments received in the event of your before the age of 75. The proceeds are payable less 35% tax.

Hope this helps.

bogeysmum

Sorry, I forgot to qualify the above by saying that even if you do not have protected rights, you can still opt to include a spouse's pension and guaranteed period, but these do reduce the amount of initial annuity you receive. The spouse's pension costs more than the guarantee.

Value protection can be quite expensive and there are only very few providers who offer this as an option.

zygurat789

bogeysmum wrote: »

Sorry, I forgot to qualify the above by saying that even if you do not have protected rights, you can still opt to include a spouse's pension and guaranteed period, but these do reduce the amount of initial annuity you receive. The spouse's pension costs more than the guarantee.

Value protection can be quite expensive and there are only very few providers who offer this as an option.

Sounds like this is the assured value I mentioned at the beggining. Thanks but it doesn't sound quite as attractive as the name would suggest.

zygurat789

jamesd wrote: »

100% pension for the spouse automatically and after tax the pot that remains can be inherited.Higher income for younger (under 75 or so) retirees is available, depending on investments and whether enhanced or impaired life annuity is available. Lower risk available instead if desired, at the cost of reduction in income.
We've already ensured my spouse has a bigger pension than me and over half of our joint retirement income is RPI linked from the safest source.
Does this not equate to risk? Are you anywhere near the stock exchange?
There used to be a phrase in this area "widows and orphans". Would these investments you refer to come with the warninf "Investments may go down as well as up" if so they come with this warning for a very good reason - it's true. I very definatel agree with the late
re safer than an annuity is easy. Just choose to invest in UK government bonds held to maturity and your capital and income is guaranteed by the UK government which is more reliable than any insurance company.
Yes the less risk the lower the return - hasn't it always been so. I suppose the trick is to equate the level of risk in an annuity with investments (just to compare). I read on here that this would mean that the drawdown income was equivalent to an indexed annuity. There is no way I am going to scrimp in the early years of my retirement and wonder what to do with all my income when I'm bedridded just so my children can have more.
There will be a significant income penalty for that ultra-safe option but low risk and higher income can be obtained by adding corporate bond, property and equity income funds to the mixture.

You can choose any level of risk, from safer than an insurance company to completely reckless.

But it's not for everyone. It's more interesting for those who have been actively managing their investments before retirement and who are happy to continue doing so after retirement. It's unsuitable for those with no investment experience, except if professionally managed. This means that it's unsuitable for most people, at least long term, but worth mentioning so that those it's suitable for are aware of it.
Agreed choice is good but there are some who want to ram it down your throat even after you have said you want to talk about its rival.
At the moment it's particularly useful as a tool to delay buying an annuity while market conditions are unfavourable, even for those who will buy one or more annuities eventually. Used this way it's a risk reduction tool compared to buying an annuity at a single point in time.

That last idea is good but I'd still like to know the mechanics of going from pension pot to annuity and the time limits because arguably when interest rates rise, shares fall.

This is why I didn't want to discuss drawdown. It is unsuitable for people who are cautious by nature and who have nightmares about anything to do with that gambling den.

EdInvestor

It may be worth pointing out to other readers (we know zygurat 789 is not interested) that if a drawdown is invested in Government gilts kept to maturity so that it is ultra safe, that the remainder of the fund left over if the investor dies before age 75, will be available for a 100% pension for the spouse - payable as an income or as a lump sum minus 35% tax.Children are not normally involved unless they are dependant.

Under drawdown you can take a maximum income of 120% of the annuity rate for your age (and this can be revalued later if your fund value increases.)This rule is unaffected by the way a drawdown is invested. So there is actually no need to take a reduced income while remaining safely invested, because there will be plenty of warning well in advance if this would cause problems.If so, exiting drawdown either to an annuity or to a different investment strategy is easily achieved.

Drawdown, however invested,and totally unlike annuities, does not lock you into a certain income based on your age forever at the loss of all capital and the inadequate promise that the income will last as long as you live.

In Jane Austen's time this might have been relevant.But now, in the unlikely event you did run out of money, you would simply join the large swathe of pensioners in the UK who qualify for Government support through pension credit and other benefits.The downside risks are nothing like what they were.

zygurat789

EdInvestor wrote: »

It may be worth pointing out to other readers (we know zygurat 789 is not interested) that if a drawdown is invested in Government gilts kept to maturity so that it is ultra safe, that the remainder of the fund left over if the investor dies before age 75, will be available for a 100% pension for the spouse - payable as an income or as a lump sum minus 35% tax.Children are not normally involved unless they are dependant.
And when the spouse dies?
Under drawdown you can take a maximum income of 120% of the annuity rate for your age (and this can be revalued later if your fund value increases.)This rule is unaffected by the way a drawdown is invested. So there is actually no need to take a reduced income while remaining safely invested, because there will be plenty of warning well in advance if this would cause problems.If so, exiting drawdown either to an annuity or to a different investment strategy is easily achieved.
So you invest safely with a low income, and take a pension of 120% annuity rate, you must be depleting your capital
Drawdown, however invested,and totally unlike annuities, does not lock you into a certain income based on your age forever at the loss of all capital and the inadequate promise that the income will last as long as you live.
There is a chance you will lose the lot, both capital and income
In Jane Austen's time this might have been relevant.But now, in the unlikely event you did run out of money, you would simply join the large swathe of pensioners in the UK who qualify for Government support through pension credit and other benefits.The downside risks are nothing like what they were.
So this is the ultimate guarantee with a drawdown - penury

Isn't it considered bad manners to hijack a thread once, let alone everytime you post?

zygurat789

Quote Edinvestor (from another thread)

At 65 your tax personal allowance goes up to £9490 at present.So your income including all pensions (incl state)will be tax free up to that level.

I would take the lump sum and put it in your ISA over a couple of years.If married try not to waste tax allowances by equalising your income.

The size of your state pensions may mean that you can avoid index linking your private ones, which is undesirable as it takes too long to catch up.

Conventional wisdom suggests that people coming up to retirement should move money out of risk based based into safe areas to avoid last minute losses.

Check all pensions for any valuable guarantees (especiallly guaranteed annuity rates) and do not move them until you are sure you won't lose out.Also make sure you don't miss any deadlines for the same reason!

After checking, it may be worth investigating transfer as you may get a better annuity deal with one big pot rather than three small ones. See a local IFA, it won't cost you anything as the annuity provider will charge you for the service (END OF QUOTE)

Wot no mention of drawdown? Do you no longer believe in them?
It would appear that annuities are useful, do have a place in pension planning afterall

cyclonebri1

??????

The op is obviously is not interested in any answers to the original post.

This is not an advice post, other than the op wanting to advise others.

Total !!!!!, under advice;)


I may be wrong bu....:A

zygurat789

cyclonebri1 wrote: »

??????

The op is obviously is not interested in any answers to the original post.

This is not an advice post, other than the op wanting to advise others.

Total !!!!!, under advice;)


I may be wrong bu....:A

I didn't want to talk about drawdown, I didn't want advice and very few people kept on topic. I have given my personal opinion about drawdown and now I'm accused of giving advice.
When I am able to answer somebody's query I do so courteously and on topic. If that answer is not understood I accept that I may know more on the subject than the person asking the query and I elaborate.
I do not hijack the thread, I do not try to force my opinions on the OP, I do not start being sarcastic snide and rude and I do not make false accusations.