Saving for your retirement - a new approach

mbarge

Paul_Herring wrote: »

It's not meant to. It's meant to protect you from the perceived volatility of the stock markets up to the time you want to cash your pension fund in if it's heavily invested in said markets

So you agree!

mbarge

Paul_Herring wrote: »

Hmm - with inflation over 20 years, I'm sure that works out to a lot less than the headline 12.31% it implies. Or is the "guaranteed pension" figure indexed against some PI index?

I agree - no inflation protection. But then look at current Gilt yields (4.25% long term) - clearly the market's not too worried about inflation.

Paul_Herring

The interest on current Gilt Yields are affected by the price of them. If the markets think inflation may be a problem, the markets start selling them cheaper so the yield rises.

mbarge

I'm 48 years old. I have a pension fund of £100,000 invested in equities. It's seems to have been worth £100,000 for some time now!

I'm seriously considering taking half of it and using it to buy a fixed future pension. For my £50,000 I've been quoted a guaranteed pension of £5,864 that will start when I reach age 65.

So whatever happens to the stock markets and annuity rates, I know that much is protected and guaranteed. Its not that I'm bearish about stock markets and think this will provide me with more pension its the risk that worries me. Currently my standard of living when I retire is dependent on how stock markets grow over the next 17 years and what happens to annuity rates (which also seem to be in a falling trend!).

For someone who's cautious like me - is there any alternative?

zygurat789

The £50,000 needs to grow at, on average, 3.54% pa to give a fund of £84,254 after 16 years which at an annuity rate of 6.96% will produce a pension of £5,864.

Paul_Herring

zygurat789 wrote: »

The £50,000 needs to grow at, on average, 3.54% pa to give a fund of £84,254 after 16 years which at an annuity rate of 6.96% will produce a pension of £5,864.

I'm sure whichever firm is taking his £50,000 will quite easily manage 3.54% pa over that term to give him back a pension of £5,864 pa.

mbarge

zygurat789 wrote: »

The £50,000 needs to grow at, on average, 3.54% pa to give a fund of £84,254 after 16 years which at an annuity rate of 6.96% will produce a pension of £5,864.

I doubt that's right - have you allowed for future improvement to mortality which will affect annuity rates? 17 years from now mortality rates are projected to be 20%-30% lighter than they are today.

mbarge

Paul_Herring wrote: »

I'm sure whichever firm is taking his £50,000 will quite easily manage 3.54% pa over that term to give him back a pension of £5,864 pa.

You'll need a lot more that 3.54%pa to fund a pension of £5864 in 17 years time given the annuity rate risk. And what about interest rates? This is not a 17 year risk it's more like a 50 year risk.

Paul_Herring

mbarge wrote: »

17 years from now mortality rates are projected to be 20%-30% lighter than they are today.

Credible citation please. The Mail or The Times don't count.

mbarge

Paul_Herring wrote: »

Credible citation please. The Mail or The Times don't count.

CMI Reports from the Institute of Actuaries.