Annuity v. Bonds v. ???????????

Froggitt

My retired mum (71) has about £100k to provide an income in addition to her pension income.

We have discussed buying an RPI annuity, fixed rate bonds paying a monthly income, and investing in equities/funds.

For annuities, there are various calculators out there that help you identify the best rates, but are they like unit trusts i.e. if you do it thru an IFA (rather than direct) you get a better rate thru commission share?

Bonds e.g. building society paying 5% p.a. for 5 years and a monthly income from it.

Equities/funds - she does not really want to risk her capital.

Any thoughts on the above, and alternative options? e.g. saw a mention of "structured products" whatever they are on another thread.

dunstonh

For annuities, there are various calculators out there that help you identify the best rates, but are they like unit trusts i.e. if you do it thru an IFA (rather than direct) you get a better rate thru commission share?

I would be surprised if many do them direct. Although I would guess that the terms are not great.

Equities/funds - she does not really want to risk her capital.

She is replacing investment risk with inflation risk and shortfall risk. Also, with the annuity, she is effectively risking the capital and risking her income. £100k with income withdrawn will be worth around £67k in 10 years time. 5% income will be worth around 3.35% income.

alternative options? e.g. saw a mention of "structured products" whatever they are on another thread.

Typically a maximum of 25% of your holdings and no more than 10% with any one market counterparty. Terms are not great at the moment.

Chances are that a few solutions would be required rather than just one. Including pension contributions.