Annuity or drawdown?

yogibearlive

Will a guaranteed annuity of 9.3% give a better return as opposed to drawdown over 15 year period? While I realise that no one can forsee how rates will move, how have past comparisons featured?

CannySaver_2

Hi

9.3% is a great rate, just look at a pension annuity calculator to see how good it is compared to annuity rates of 5.5 - 6% in the main.

If you are just looking to maximise income and the annuity they are offering you is in an acceptable form (guarantees, spouse's pension etc) I would snap their hand off!

The first thing to say re drawdown is that the 9.3% will be well above the maximum GAD level you could take, you will therefore get more income from the annuity.

The only time I would think that drawdown would be a better option here is if you had seriously impaired life expectancy or were terminally ill and a lump sum to your financial dependents on their death was important.

Other than that I can't think of any reason not to take the guaranteed annuity rates.

Hope this helps.

The Canny Saver

yogibearlive

Thanks for that Canny, my inclination was leaning towards the annuity anyway with the spouse option although she is 9 years my junior and has her own pension(s) funds.

Reading all these forum really help people like myself, but in reality it appears that whatever you do you're damned if you do and damned if you dont. It shows my lack of knowledge because it appears that like most aspects of life, luck plays a good part in everything that happens.

Once again thank you all for your views.:rotfl:

atush

Check your policy carefully, sometimes the GARs are only available on a single life basis- if you want spousal pension you could be better off with a DD.

If it applies to annuities with spousal pension I agree- bite their hand off taking it lol

Frogfish

Hi OP. In this instance I really would not look at past performance.

In terms of drawdown the GAD rates have dropped and, in view of rising life expectancy and the current economic climate, they are unlikely to rise again any time soon. The government has made it clear recently that they are not minded to review the current rates.

You may also wish to consider peace of mind - 9.3% is an excellent rate in the present climate and you won't have the worry of keeping your money invested, paying charges, having to meet any falls in the market...

It tends to boil down to, if you want certainty and security of income, take the annuity. If you want to take on the risks, go into drawdown.

fairleads

yogibearlive wrote: »

Will a guaranteed annuity of 9.3% give a better return as opposed to drawdown over 15 year period? While I realise that no one can forsee how rates will move, how have past comparisons featured?

How old will you be when you take the annuity?

yogibearlive

I retire this year, and many thanks to all for your time confirming what I planned to do, but needed some views from other and more knowledgeable people.

yogibearlive

Fairleads, sorry 65.

srcandas

yogibearlive wrote: »

Fairleads, sorry 65.

Yogi do you have the option to wait another year or so? And if so would the 9.3 increase?

I have a pru and they are offering me 9.3 but say if I extend this will increase. I don't have a quote but by waiting one or two years there will be increased pension because of reduced life expectancy, fund growth (hopefully ), and an increase on 9.3.

'Perhaps worth looking at if you can wait. (I'm assuming you might be able to if you are considering draw down).