Nervous Retiree

choi

Thanks Malthusian

Some great ideas there

I am meeting a new IFA next week so lets see what crops up

I did think of just going with the following

State Pension £8750.00
Small Annuity Pension £7,000.00

Small top up from savings
Plus £180.00 per month from a loan debtor

This would give me circa £350.00 per week after cash

This could see me through for the next few years without too much hit on my savings

I can then review in three years time aged 70

I would put left over cash in high interest secure accounts to provide some top up to the cash withdrawals

Hopefully inflation will not boom out of control

I am also ok in looking for a part time job

I know this sounds a bit pathetic so I will await your comments

AnotherJoe

Seems bang on to me if your plan is to have the most money saved up when you die.
You dont seem to be planning to ever spent your retirement savings so what was the point of accumulating them ? The idea is to spend them. You have day to day spending easily covered by your pensions, wife's income and then her pensions. And then incredibly talking about getting another job ! What all that money you are too scared to spend for ?

jamesd

choi wrote: »

I have around 250 k in a Pension Pot currently in an Aviva cash account ... I have personal savings of £200 k ... There is a sum of £300 k in the business

If you were to use routine safe withdrawal rates you could expect these sorts of incomes from £750k of capital:

1. increasing by inflation each year, commonly called the "4% rule" based on its US level: 3.2% of capital, £24k a year with a very high probability of dying richer than you start
2. using the Guyton-Klinger rules, starting on 5% of capital, £37.5k a year and increasing with inflation, but skipping that, taking extra cuts or getting extra increases depending on the investment conditions you actually live through.

Both of those assume 1.5% in costs and using 60-70% in shares.

So one key question is whether you hate the ups and downs of investments so much that you want to not get an income several times higher from your money?

Even if you want guaranteed income your annuity plan looks poor. If you defer claiming your state pension, for each year you get an extra 5.8% added to it that increases with inflation. Say you and your wife get 8.5k of state pension. If you defer for five years each and take the 8.5k from savings instead you'd spend 42.5k each to get 2.46k a year each. That's a total of £4,920 increasing with inflation for a purchase cost of £85,000. You don't have to stop at five years. You might go to ten for your wife to keep her income up after your death, say. There isn't a guarantee that this will pay out for 30 years but term life insurance can do that quite cheaply for 10-15 years if health is good.

A 30 year guarantee doesn't seem like a good idea. Buying at 67 this means that the annuity provider has to price it to pay out for at least 30 years, as if you live to be 97. About 90% of men will be dead by that age so you're asking them to cut your annuity payment by assuming an unusually long life. A ten or twenty year guarantee and/or splitting into one annuity for you and one or your wife seems likely to be a better move. What are you trying to achieve by requiring at least 30 years of payments?

justme111

I believe it is obvious- OP is trying to ensure he does not outlive his annuity - what if he lives till 97?

jamesd

justme111 wrote: »

I believe it is obvious- OP is trying to ensure he does not outlive his annuity - what if he lives till 97?

A normal pension annuity is a lifetime annuity that pays for as long as the person lives.

If there's a desire to provide for a spouse a dual life annuity that pays as long as either lives can be used, or one annuity each so income is reduced when expenses drop after the first death. Or state pension deferral that's likely to be cheaper and provide full inflation protection.

A guarantee is normally used to try to ensure at least some payment in the case of early death, to increase the value of the estate perhaps. But buying one until age 97 is late death, not early, and can be expected to significantly reduce the annuity payments.

So I'm wondering what the purpose is, since it's likely that there are better ways to achieve that purpose.

justme111

Ah. Apologies. My bad. I missed the bit that ot os a 3% increase guarantee that is bought .
Basically this chap has more than enough money and it is only his fear that it is not going to be enough that is an issue. As it is impossible to guarantee anything 100% I don't think he is going to e happy no matter what

choi

I have been in touch with my old IFA

According to him I could go two ways

Annuity Option

State Pension £8750.00
Small Annuity Pension £7,000.00
Single 3% escalation 30 year guarantee

Small top up from savings
Plus £180.00 per month from a loan debtor

This would give me circa £350.00 per week after tax

His cost for this option to set up Annuity 0.55 %
No other costs

This could see me through for the next few years without too much hit on my savings
I can then review in three years time aged 70
I would put left over cash in high interest secure accounts to provide some top up to the cash withdrawals
Hopefully inflation will not boom out of control
I am also ok in looking for a part time job

Draw Down Option

Draw approx 3.5% giving circa £8750.00 using a cautious balanced income portfolio giving circa 4%

There is a tax free benefit fro 25% using this

His cost for this option to set up Drawdown 0.55 %
Annual running cost total 1.35%

Downside to this for me is that Annual Running Costs may eat into the pot

I welcome all comments and well meant advice

I find making this decision very stressful

JoeEngland

choi wrote: »

I have been in touch with my old IFA

According to him I could go two ways

Annuity Option

State Pension £8750.00
Small Annuity Pension £7,000.00
Single 3% escalation 30 year guarantee

Small top up from savings
Plus £180.00 per month from a loan debtor

This would give me circa £350.00 per week after tax

His cost for this option to set up Annuity 0.55 %
No other costs

This could see me through for the next few years without too much hit on my savings
I can then review in three years time aged 70
I would put left over cash in high interest secure accounts to provide some top up to the cash withdrawals
Hopefully inflation will not boom out of control
I am also ok in looking for a part time job

Draw Down Option

Draw approx 3.5% giving circa £8750.00 using a cautious balanced income portfolio giving circa 4%

There is a tax free benefit fro 25% using this

His cost for this option to set up Drawdown 0.55 %
Annual running cost total 1.35%

Downside to this for me is that Annual Running Costs may eat into the pot

I welcome all comments and well meant advice

I find making this decision very stressful

Presumably the 1.35% is on top of the drawdown provider's percentage fee?

choi

That is correct
The 1.35%cost would include everything and' would normally be financed from capital growth'

What concerns me is on a cautious drawdown there may not be enough capital growth to pay me and fund the 1.35% costs

JoeEngland

choi wrote: »

That is correct
The 1.35%cost would include everything and' would normally be financed from capital growth'

What concerns me is on a cautious drawdown there may not be enough capital growth to pay me and fund the 1.35% costs

Sounds like a lot to me. You could set up a SIPP yourself and just pay the provider's fees which can be as little as 0.5% pa I think. The question is whether an IFA can pick a provider and funds that will generate enough extra growth to justify the extra cost.