Am i missing something ?

jamesd

elantan wrote: »

So this guy ( with the break even at 29years) was basically betting against the annuity company ?

Correct! And that is why those with a religious belief that prohibits speculating on death cannot use annuities. Notably the Christian Brethren. The annuity payouts in part rely on those who die sooner subsidising those who die later.

To further explain why choosing a level - not increasing - single life annuity is most common, here are some example rates, income per year for an annuity purchased with £100,000 at age 65:

£5,916: Man alone, not increasing, no guarantee
£5,882: Man alone, not increasing, 5 year guarantee
£4,187: Man alone, 3% increases, 5 year guarantee
£3,732: Man alone, RPI increases, 5 year guarantee
£5,239: Man and wife 3 years younger who gets 50%, no increases, no guarantee
£3,535: Man and wife 3 years younger who gets 50%, 3% increase, no guarantee

A guarantee means it'll pay out at the full rate for as long as the guarantee says, from the date of purchase. So die on the first day and those who inherit from you get payments for five years anyway.

elantan wrote: »

What then is the process for draw down ?

You pick where you want your money invested and take an income from it, up to a maximum limit called the GAD limit.

elantan

hi all,

i fell asleep with pensions floating through my head last night lol

ahhh i forgot about inflation dstazza thanks for adding that one

had a very quick look at the drawdown idea and put figures into the calculator

i put in my age as retiring just now and used the amount from what the statement gave me £35k

it says i should get

Tax-Free Lump Sum: £8,750.00
Residual Pension Fund Value: £26,250.00

Maximum Drawdown Pension per annum: £1,233.75

[Based on standard 100% GAD income of £47.00 per £1,000 of pension fund per annum, and a Gilt Index Yield figure of 2.25%]


does that look about right?

now again the whole what if i die question ( i'm not wishing i would die in fact kinda like the idea of living to be over 100 ... but having had a T.I.A at 39 and other health issues it dont look too good tbh)

say i died after three years, would the remainder of the fund be transferred to my spouse/son?


would i have to ask for this to be included ?

elantan

jamesd wrote: »

Correct! And that is why those with a religious belief that prohibits speculating on death cannot use annuities. Notably the Friends/Quakers. The annuity payouts in part rely on those who die sooner subsidising those who die later.

To further explain why choosing a level - not increasing - single life annuity is most common, here are some example rates, income per year for an annuity purchased with £100,000 at age 65:

£5,916: Man alone, not increasing, no guarantee
£5,882: Man alone, not increasing, 5 year guarantee
£4,187: Man alone, 3% increases, 5 year guarantee
£3,732: Man alone, RPI increases, 5 year guarantee
£5,239: Man and wife 3 years younger who gets 50%, no increases, no guarantee
£3,535: Man and wife 3 years younger who gets 50%, 3% increase, no guarantee

A guarantee means it'll pay out at the full rate for as long as the guarantee says, from the date of purchase. So die on the first day and those who inherit from you get payments for five years anyway.

You pick where you want your money invested and take an income from it, up to a maximum limit called the GAD limit.

i'm going to sit down and take my time with all of this as i think i need to understand things much better , thanks though for the examples

Linton

elantan wrote: »

......

now again the whole what if i die question ( i'm not wishing i would die in fact kinda like the idea of living to be over 100 ... but having had a T.I.A at 39 and other health issues it dont look too good tbh)

say i died after three years, would the remainder of the fund be transferred to my spouse/son?


would i have to ask for this to be included ?

If you died before taking an annuity then the pot can be passed to your spouse, or someone nominated by you.

After you take an annuity the pot ceases to exist. All that remains is your agreement with the annuity company when the annuity was set up. This as in some of James's examples could include a 50% pension for your spouse for the rest of his life, or any other % such as 100%. But of course the more you leave for your spouse the less you get whilst alive.

Also James's examples included a 5 year guarantee. In that case your estate would receive your full pension for the remainder of the 5 years (2 years in your example) and then switch to the agreed % to your spouse.

The facility to provide a % annuity to someone else (after the guarantee period) is restricted to a spouse not children.

elantan

I was thinking more of a draw down pension in comparison to an annuity this time as I think the annuity wouldn't be the best thing for me

jamesd

elantan wrote: »

i fell asleep with pensions floating through my head last night lol

Welcome to the club!

elantan wrote: »

i put in my age as retiring just now and used the amount from what the statement gave me £35k

it says i should get

Tax-Free Lump Sum: £8,750.00
Residual Pension Fund Value: £26,250.00

Maximum Drawdown Pension per annum: £1,233.75

[Based on standard 100% GAD income of £47.00 per £1,000 of pension fund per annum, and a Gilt Index Yield figure of 2.25%]


does that look about right?

Yes. For longer term planning you should know that the normal gilt rate is 4.5-5%. It's around record-breaking lows at the moment due to the fiscal easing policy and Eurozone troubles. Records for hundreds of years. So it'll probably go up significantly within a few years.

Also note that it's the limit on the amount you can take out as income. It says nothing about the performance of the investments inside the pension. They could grow or pay income of more or less than that amount. And they will, because investments go up and down. You can deal with this by keeping a bit of cash in the pension pot.

elantan wrote: »

say i died after three years, would the remainder of the fund be transferred to my spouse/son?

Yes. To your spouse, 100% could go into a pension pot for them. They could then take an income from that. Your son could get it after a 55% tax charge deduction and your spouse could instead choose to take it outside a pension after a 55% tax charge deduction.

elantan wrote: »

would i have to ask for this to be included ?

No. It's automatically provided as part of all drawdown so you always get it included.

elantan

Thanks James that's a great help, I understand it much more now ( no where near on the same level as most people but much more than I did

Will play around with calculators a bit I think and continue to pay into my pension as often as I can till I get a full time job then really tackle it head on

I need to work out the best way for me to save 5 years wages as well as hubby is 5 years older than me and we want to retire at the same time, I'm currently saving into my H&L ISA but no where near enough ( again I plan on attacking this when I get a full time job)