Alternative to an annuity?

atush

mania112 wrote: »

Less likely than an Annuity?!

Less likely than magpie says?

And DD can be inherited 100% by a spouse, which with an annuity would cost a bomb.

atush

Thrugelmir wrote: »

People overlook events such as the impact of Deepwater Horizon on BP's share price and ability to pay dividends. Likewise holdings in high yielding safe shares such as banks. So decisions to secure an income for retirement along with investment choices need to made carefully. As there's no chance to replenish capital once it's lost.

Personally, not sure I would advocate single shares in DD, or at least not more than a few % for just this reason. Collective investments are less risky.

dunstonh

People have been claiming that annuity rates are "low" ever since annuities were first invented.

True. They were actually rising prior to the credit crunch and had been for about 3 years. The drop in interest rates has certainly hit them but they are higher than they were 2-3 years ago.

It should also be noted that investment returns over the last decade were lower than historic. So, alternatives haven't fared too well either.

Thrugelmir

Personally, not sure I would advocate single shares in DD, or at least not more than a few % for just this reason. Collective investments are less risky.

Even collective investments take a hit when the something of this magnitude hits. 3 quarters of no dividend payout was a significant sum.

kidmugsy

FatherAbraham wrote: »

It's that people vastly overestimate how much income their capital can safely provide.

About a dozen years ago, a very intelligent friend told me that he understood that anyone in their mid sixties with pension savings of £100,000 had all the money he'd ever need. Stone the crows!

dunstonh

kidmugsy wrote: »

About a dozen years ago, a very intelligent friend told me that he understood that anyone in their mid sixties with pension savings of £100,000 had all the money he'd ever need. Stone the crows!

Make that two dozen years ago and he may have been right. That is a lot of the problem with pensions. People see one bit of paperwork and rely on it still being correct 20-30 years later.

atush

Thrugelmir wrote: »

Even collective investments take a hit when the something of this magnitude hits. 3 quarters of no dividend payout was a significant sum.

They would take slight hit, but nothing like the shares did (which I have to say I bought some then).

Thrugelmir

I bought BP originally at 121p. So no complaints. My observations are made after years of share ownership.

bumblebee5

Hi bigadaj
Just picking up from an earlier point you made re Defined Benefit Scheme and taking 25% tax free lump sum.


I have DB scheme (not paying in any more) due to take in 2015 and was considering taking the 25% tax free, the scheme has a transfer value of, allegedly, £133k as of today.


What are the reasons not to take the 25% please?

mania112

bumblebee5 wrote: »

What are the reasons not to take the 25% please?

Because it reduces what you can take regularly as an annuity.

Retirees will tend to spend the tax free sum quickly and on non-essentials, and not to fund their retirement.