Guaranteed income in retirement?

SallyG

Why didn't the Chancellor do anything to improve annuities?

Linton

What would you suggest? If you want a guaranteed income you must have it backed by gilts, and if gilt interest rates are low annuities will be expensive.

Thrugelmir

SallyG wrote: »

Why didn't the Chancellor do anything to improve annuities?

The Chancellor can't legislate how companies run their businesses. However he can create a fundamental change in the market which will force insurers to rethink their products if they they wish to stay in business.

Thrugelmir

Linton wrote: »

What would you suggest? If you want a guaranteed income you must have it backed by gilts, and if gilt interest rates are low annuities will be expensive.

Hugely profitable though to the point of being detrimental to savers.

Lack of pension saving is a major issue in the UK..

bmm78

Improve in what respect? Rates, product flexibility, or both?

I'm not sure what can be done to improve a commerical rate provided on commercial terms that there is no compulsion to accept. The only area that can be affected is opening up legislation to create wider alternatives.

lvader

Thrugelmir wrote: »

The Chancellor can't legislate how companies run their businesses.

Of cause he can, Labour will sort them out when they get back into power. All prices will be frozen and companies will be forced to give all their profits to the peoples!

Linton

Thrugelmir wrote: »

Hugely profitable though to the point of being detrimental to savers.

.......

Is that so? The break even points for annuities dont seem that far from the average life expectancy. The cost of an annuity is basically driven buy the LE and the gilt rate, I suspect you will find that the profit is a relatively small factor.

Thrugelmir

Linton wrote: »

Is that so? The break even points for annuities dont seem that far from the average life expectancy. The cost of an annuity is basically driven buy the LE and the gilt rate, I suspect you will find that the profit is a relatively small factor.

How much is actually invested is the key to value. Initial commission rates of up to 3% of fund value aren't uncommon. The insurer has to cover overheads, regulatory fees, tax and dividends along with retaining an element of profit. These factors will diminish the value of a pot over 20 -30 years.

dunstonh

Open market option annuities dont have a huge profit and what profit there is, is very long term.

Linton

Thrugelmir wrote: »

How much is actually invested is the key to value. Initial commission rates of up to 3% of fund value aren't uncommon. The insurer has to cover overheads, regulatory fees, tax and dividends along with retaining an element of profit. These factors will diminish the value of a pot over 20 -30 years.

We are talking about annuities here so "the value of a pot over 20-30 years" isnt relevant.

Say for an annuity the overheads make a difference of 10% of payout per year. An annuity of £10K rather than £11000. Doesnt seem to justify "hugely profitable to the detriment of savers". This amount of money is far less than the extra cost to a retiree of having to plan for possible life expectancy rather than average life expectancy - without an annuity this is what he would need to do.

Thrugelmir

dunstonh wrote: »

Open market option annuities dont have a huge profit and what profit there is, is very long term.

Profit is declared after expenses. So how much of the "pot" is lost in expenses?

Just performed a back of the fag packet calculation.

Starting with a £100k pot. Drawing down £6k a year and earning 3% on the remaining balance. After 30 years there's still £44,860 left in the pot.

Does that offer value for money to the investor?