Latest round of QE – how long before it impacts on annuity rates?

benny5

With a relatively small pension pot (£39K) to convert I have been monitoring annuity rates for some time. The trend appears to a slow decline.

Will this latest round of QE further accelerate this decline and if so when is it likely to manifest itself.

Just wondering if I should make a move sooner rather than later.



Regards,


Benny.

Proxy

It won't.

The gilt market has already priced in the latest changes months ago. When QE first started, the immediate shock on gilts was unparalleled. These days, the market does not care anymore - gilt prices actually fell slightly (meaning yields up) last time I looked today.

jamesd

Better later, until the troubles are well out of the system. Easy enough to use income drawdown until then and depending on the investments you use you might benefit from the recovery as well.

benny5

jamesd wrote: »

Better later, until the troubles are well out of the system..

But that could take years.

jamesd wrote: »

Easy enough to use income drawdown until then and depending on the investments you use you might benefit from the recovery as well.

The fund size hardly justifies that route.

Thanks for your input.

Regards,

Benny.

jamesd

Yes it could take years and probably will take at least three to five.

A pension pot size of £39k is plenty for drawdown so long as you don't choose a high cost provider. While its fund holding costs aren't inexpensive a place like Hargreaves Lansdown charges only £75 every three years for a GAD calculation and nothing for regular income taking. The £25 a year average cost isn't of huge impact given perhaps 4-6% taken as income, £1560-2340 a year.

benny5

Thanks jamesd for the insight into drawdown.

Being extremely cautious and not wishing to endure the likely traumas of selecting and managing funds in a drawdown wrapper my current inclination is to cash in my chips now.

The bottom line really is one of swapping current certainty, albeit for a potentially lower return, with future uncertainty but with the potential for higher returns.

The simplicity of pensions!!



Regards,


Benny.

RenovationMan

benny5 wrote: »

Thanks jamesd for the insight into drawdown.

Being extremely cautious and not wishing to endure the likely traumas of selecting and managing funds in a drawdown wrapper my current inclination is to cash in my chips now.

The bottom line really is one of swapping current certainty, albeit for a potentially lower return, with future uncertainty but with the potential for higher returns.

The simplicity of pensions!!



Regards,


Benny.

Surely it'll be less traumatic to use drawdown than to buy an annuity at historical lows and then spend years in retirement watching annuity rates (and equities) recover and knowing you bought at the absolute trough of the market.

A hasty decison made today could impact you for decades in retirement.

benny5

RenovationMan wrote: »

Surely it'll be less traumatic to use drawdown than to buy an annuity at historical lows and then spend years in retirement watching annuity rates (and equities) recover and knowing you bought at the absolute trough of the market.

Its just that I don't know where to start with drawdown and have no insight into their potential pitfalls and there must be some. At least I have some understanding of annuity's.

Incidentally this pension pot is an ex Protected Rights fund..

Regards,

Benny.

RenovationMan

benny5 wrote: »

Its just that I don't know where to start with drawdown and have no insight into their potential pitfalls and there must be some. At least I have some understanding of annuity's.

Incidentally this pension pot is an ex Protected Rights fund..

Regards,

Benny.

Every journey begins with a single step. I didn't know how to play the guitar until I sat down and made the effort. There is plenty of stuff online to help you 'gen' up (on finances, not guitar playing). It could certainly be worth your while to spend a bit of time researching - it's your money after all.

Good luck with whatever route you decide to take.

benny5

RenovationMan wrote: »

Every journey begins with a single step. I didn't know how to play the guitar until I sat down and made the effort. There is plenty of stuff online to help you 'gen' up (on finances, not guitar playing). It could certainly be worth your while to spend a bit of time researching - it's your money after all.

Good luck with whatever route you decide to take.

Thanks for that, really appreciate the encouragement. At least I'm now going to research the possibility.

Regards,

Benny.