Guaranteed Annuity Rate or better growth?

soulsaver

I'm approaching 60.

I have a personal pension pot with SLoFC worth currently c£80k invested in UK equities.

It has a progressive guaranteed annuity rate of 9% at if bought at age 65 rising to 12.715% if bought at aged 75.

If it were to be transferred out it would lose the GAR. Under SLoFC management its performance has been at best unexciting the last 10 years but has recently been outsourced to a pro fund manager.

What should I consider in deciding whether to stick with it? Or should I try to get better performance at the cost of the GAR via a SIPP?

Input much appreciated.
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Aegis

Sounds like you'd need investment growth of about 80% above your to match what you'd currently be able to get from presumably age 65. In the timeframe you're looking at, it sounds like it might be a bad idea to give up those guarantees!

When you take into account the rates at 75 it seems even more straightforward!

soulsaver

Aegis wrote: »

Sounds like you'd need investment growth of about 80% above your to match what you'd currently be able to get from presumably age 65. In the timeframe you're looking at, it sounds like it might be a bad idea to give up those guarantees!

When you take into account the rates at 75 it seems even more straightforward!

Thanks for that. But to clarify my question is how do you (does one) come to those figures?
For example: Should you compare expected annuity rates in 5, 10 & 15 years with the GAR; in the event that the GAR is then twice the expected annuity rate, then you'd have to achieve 100% growth in the period to stand still?

If so, how do you find expected annuity rates for a point in time 5, 10, 15 years hence?

Will inflation complicate the decision?

How does draw down options affect the decision?

dunstonh

Your GAR has at least 50% higher than the open market annuity rate (assuming its single life, 5 year level). So, any alternative will have to grow by 50% more just to match it.

You say you are invested in UK equities. That is probably why it has been unexciting as single sector investing in a limited area is risky and rarely gives best performance. You wouldn't expect their funds to be market leaders but you can at least invest better than that. Plus, you will probably be looking to wind down risk. So the ability to get 50% better in a short term has to be unrealistic.

soulsaver

dunstonh wrote: »

Your GAR has at least 50% higher than the open market annuity rate (assuming its single life, 5 year level). So, any alternative will have to grow by 50% more just to match it.

You say you are invested in UK equities. That is probably why it has been unexciting as single sector investing in a limited area is risky and rarely gives best performance. You wouldn't expect their funds to be market leaders but you can at least invest better than that. Plus, you will probably be looking to wind down risk. So the ability to get 50% better in a short term has to be unrealistic.

Thanks Dunst, telling me what I should have not done years ago isn't particularly constructive.

And it's this pot has been left in UK equities, it's not the only pension pot I've got.

dunstonh

telling me what I should have not done years ago isn't particularly constructive.

You were the one that hinted at underperformance and seemed to think it was provider driven rather than it being sector driven. I was just making sure you were aware that it is less about the provider but where you invested.

I don't know what your knowledge of investing is like but your post suggested low knowledge. (not that low knowledge is a bad thing if its not your area of expertise or experience).

soulsaver

dunstonh wrote: »

You were the one that hinted at underperformance and seemed to think it was provider driven rather than it being sector driven. I was just making sure you were aware that it is less about the provider but where you invested.

I don't know what your knowledge of investing is like but your post suggested low knowledge. (not that low knowledge is a bad thing if its not your area of expertise or experience).

Still nothing constructive then?

Loughton_Monkey

I think the most constructive advise is to leave it where it is.

Given where you are now, hindsight doesn't matter. But you still (I assume) have total control over which funds to choose for the remainder of the time it's invested. That choice is yours. To believe that other funds with other providers would grow at such a higher rate as to provide a better annuity at 'market rates' is unrealistic to the point of virtual impossibility.