Annuity Value

bostonerimus

Let's do an example. Right now on H&L website a single life level annuity for a 65 year old has a payout rate of 5.42%. So if you pay 100k you'll be guaranteed an annual income of 5.42k. The "value" of this annuity obviously depends on how long you live. At age 83 you will break even and will have received 100k in income. Using ONS numbers the life expectancy for a 65 year old (averaging men and women) is 87 so half of the annuitants will get at least 4 years of income above their principal. if you put the 100k into a saving bond ladder returning just 2% the money will last to age 88. So most people will be better off to use the saving bond ladder where they have flexibility and if they die early they can leave some money.

lisyloo

And hes complaining because (again hypothetical) he may have spent £150k (eg less than £200k) to buy that annuity but now is being penalized.

Let's suppose you bought a banksy in the early days for £10 and it's now worth £1 million.
What get's split - the £10 or the £1 million?


If assets increase (a house being a fine example), I would have thought it's todays value that counts.
A bit odd to complain about gains.

Linton

bostonerimus wrote: »

Let's do an example. Right now on H&L website a single life level annuity for a 65 year old has a payout rate of 5.42%. So if you pay 100k you'll be guaranteed an annual income of 5.42k. The "value" of this annuity obviously depends on how long you live. At age 83 you will break even and will have received 100k in income. Using ONS numbers the life expectancy for a 65 year old (averaging men and women) is 87 so half of the annuitants will get at least 4 years of income above their principal. if you put the 100k into a saving bond ladder returning just 2% the money will last to age 88. So most people will be better off to use the saving bond ladder where they have flexibility and if they die early they can leave some money.

And if they die late? You are correct to say most people will be better off, but in this case "most" is about 52%.

Thrugelmir

bostonerimus wrote: »

Let's do an example. Right now on H&L website a single life level annuity for a 65 year old has a payout rate of 5.42%. So if you pay 100k you'll be guaranteed an annual income of 5.42k.

In which case it could be viewed as fair to award a lump sum that could buy a corresponding level of income for the other party. (If the party decides to do so is an unrelated matter). Then the outcome is equitable. With a financial consent order the aim is to have a clean break. Where neither party has a future claim on the others assets.

bostonerimus

Linton wrote: »

And if they die late? You are correct to say most people will be better off, but in this case "most" is about 52%.

Yes, I was careful in my wording. The tricky thing is not knowing if you are one of the short lived folks or one of the ones that get's the telegram from the Queen.......now here's a question. if the Queen reaches 100 will she send herself a telegram?

bostonerimus

Thrugelmir wrote: »

In which case it could be viewed as fair to award a lump sum that could buy a corresponding level of income for the other party. (If the party decides to do so is an unrelated matter). Then the outcome is equitable. With a financial consent order the aim is to have a clean break. Where neither party has a future claim on the others assets.

Agreed, you just have to take the average lifespan and current discount rate used by the insurance company.

When I got divorced my wife didn't want to bother with splitting the pensions even though her lawyer and I argued that she should. So I still have her as a 50% beneficiary on those pension accounts and I will not touch them. That way she will get half of whatever those accounts have grown to if I die before her...that only seems fair. I don't know what I'll do if she goes first. I suppose I should then add her heir if I am being pedantic.