Taking the annuity route when retirement comes.

kidmugsy

Here're some American discussions.
http://retirementresearcher.com/?s=++deferred+annuity

David.s_2

bigadaj wrote: »

Not sure you've understood the arguments against.

An annuity is a solution to provide a fixed income at a particular time, it therefore takes on risk. Your pension fund would be invested and expected to grow, so the larger pension would almost certainly be less than that which could be bought with the larger fund you would have accrued over that time. .

I know a number of people who have worked a year or two more than they had planned because their pension pot failed their expectations around 2010/11. Investments go down as well as up. You only know where the top was a year later when you are probably near the bottom waiting for recovery.
Yes, I think I do understand the arguments against. Whether you can get a fair deal from a pension company is something else. Seems to me that the traditional pension companies like Scottish Widows, Standard Life and the Pru. etc. are there so that their actuaries can play golf in the afternoons at our expense. SIPPs with clicks and bricks are a breath fresh air by comparison.

dunstonh

I know a number of people who have worked a year or two more than they had planned because their pension pot failed their expectations around 2010/11.

That is just bad planning. It didn't need to happen.

Seems to me that the traditional pension companies like Scottish Widows, Standard Life and the Pru. etc. are there so that their actuaries can play golf in the afternoons at our expense.

None of those three offer decent annuities. Pru used to but they are not as active in the field as they used to be.

SIPPs with clicks and bricks are a breath fresh air by comparison.

I don't agree. SIPPs are great for the right person but a nightmare for the average person. However, a personal pension and SIPP have nothing to do with annuities.

David.s_2

Dunstonh thank you for your comments. I agree that most people have no knowledge of economics, not even a basic understanding of inflation and index linking far less investment strategy so it would be a nightmare for them. However, I am interested in looking into some avenues of both pensions and SIPPs that may apply to me. Both are covered in this sub section of the forum as stated above. I may have missed the boat on some and others may not be on offer in the market but I have benefitted greatly from some very interesting comments and explanations from apparently experienced people on this forum, including yours, kidmugsy, coyrls and xylophone.
I have only very recently started a SIPP at age 71 with a 40% gain this year, a good start. Not being happy with that I am looking for better. I don't believe that you need to save all your life in a pension fund. It's a myth. Had I done that I would probably have lost 5% of all the money I put in at the time and 1% per annum of the pension pot. Over 50 years I would have lost 55% of my early investments and I just don't believe that a pension fund can exceed inflation with built in losses like that. Those taking the time to understand the investment possibilities and the associated fees can do well. The SIPP makes this possible as the fees are low, nothing for a cash holding, 0.3% fund maintenance etc. and you can go onto low risk a few years before the start of the annuity. All of this from stable, long standing pension companies if you chose the right one.
I am lucky in many ways as I spent my career years overseas with no income tax liability so why would I lock it into a UK pension fund and I now own my own company that can buy me a pension so my outlook on this is rather different from most.
Also, any employer looks at gross employee cost including all overheads such as car benefits, pensions etc. So any employer contribution to your pension is just money that you would receive in your hand if not as a pension contribution (although there may be a tax benefit doing it that way). It's a game!

atush

Annuites, if you want one, are better left to be bought when you are older (if you are of normal good health).

If you are 55, they can be poor value.

Annuities have their place, But finding that place all depends on the individual concerned.

zagfles

Such a product would be an excellent idea - but I don't anyone is offering them in the UK. The Americans call it a "longevity annuity", (not a deferred annuity which I think usually refers to something different).

http://money.cnn.com/retirement/guide/annuities_longevity.moneymag/index.htm

They're usually aimed at much later in life than 65 though, perhaps 80/85 or so. It enables people to plan drawdown with a fixed end date - the longevity annuity acts as an insurance policy against them outliving their end date. And of course since there's a chance you die before reaching that age, they are a lot cheaper than waiting till you get to that age and then buying it.

coyrls

zagfles wrote: »

Such a product would be an excellent idea - but I don't anyone is offering them in the UK. The Americans call it a "longevity annuity", (not a deferred annuity which I think usually refers to something different).

http://money.cnn.com/retirement/guide/annuities_longevity.moneymag/index.htm

They're usually aimed at much later in life than 65 though, perhaps 80/85 or so. It enables people to plan drawdown with a fixed end date - the longevity annuity acts as an insurance policy against them outliving their end date. And of course since there's a chance you die before reaching that age, they are a lot cheaper than waiting till you get to that age and then buying it.

Exactly, that was my understanding and I think you're right about them not being made available in the UK. Given the misunderstanding of their purpose, it would seem that there wouldn't be much of a market for them here! I guess the US products are more sophisticated, given the longer history of having to manage retirement "pots" in the US.

bigadaj

David.s wrote: »

I know a number of people who have worked a year or two more than they had planned because their pension pot failed their expectations around 2010/11. Investments go down as well as up. You only know where the top was a year later when you are probably near the bottom waiting for recovery.
Yes, I think I do understand the arguments against. Whether you can get a fair deal from a pension company is something else. Seems to me that the traditional pension companies like Scottish Widows, Standard Life and the Pru. etc. are there so that their actuaries can play golf in the afternoons at our expense. SIPPs with clicks and bricks are a breath fresh air by comparison.

As dunstonh has said there is a bit of conflation in your post, sipps don't have anything to do directly with annuities.

People would traditionally have lifestyles their investments, increasing ten proportion of bonds and cash and rdducing equities as they approached retirement to reduce volatility and the risks of a big drop at a critical time.

Many people now have a more staged approach to retirement, so going from a 40 hour week to nothing, buying an annuity with the whole pot rather than drawing down as many people do now, the latter meaning that even a short term drop will be recovered due to the years or even decades over which the money is being taken out.