Worth taking out an annuity?

Skibunny40

Been doing some pension planning, and although we're doing okay, there's a possibility we'll run out of money and be on state pension only from the age of 80+!

As we don't have any of these lovely DB pensions that I read about on these boards, I wonder whether we should consider buying a small annuity as well as other savings pots & DC pensions? Are there any "rules of thumb" about annuities I should consider?

Happy to provide further info as required, just didn't want to get bogged down in detail if not necessary!

drumtochty

T[FONT=&quot]he payment from an annuity is guaranteed but that costs as someone else is taking that risk off you and while they may be nice people they want paid for taking that risk. Especially if it will last till you die.[/FONT] [FONT=&quot] [/FONT]
[FONT=&quot]As most people wish to get a larger monthly payment that is not guaranteed, therefore they do drawdown and hope for the best.[/FONT]
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[FONT=&quot]A middle road may be to buy an annuity to cover your basic cost of living and do the rest on drawdown.[/FONT]
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[FONT=&quot]In saying that if you do not have a large pension pot as you suggest there may be little choice as to what you can do.[/FONT]
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[FONT=&quot]Others for the first 10 years before 75 use drawdown and from 75 on use an annuity as the annuity rates tend to be better from that age.[/FONT]
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[FONT=&quot]There is no correct answer here I'm afraid, especially if your pension pot is smaller than you would like.[/FONT]

Thrugelmir

Skibunny40 wrote: »

Been doing some pension planning, and although we're doing okay, there's a possibility we'll run out of money and be on state pension only from the age of 80+!

As we don't have any of these lovely DB pensions that I read about on these boards, I wonder whether we should consider buying a small annuity as well as other savings pots & DC pensions? Are there any "rules of thumb" about annuities I should consider?

Happy to provide further info as required, just didn't want to get bogged down in detail if not necessary!

Being exposed to the whims of the world markets isn't a great idea for money that may have to last you several decades. Caution isn't a bad thing.

Skibunny40

I was sort-of hoping that people would say " oh, state pension will be plenty for your needs when you hit 80", don't worry about it! But I know that's wishful thinking really...!

lisyloo

Do you both have full state pensions?
Any serps?
Do you own your own home?
Is downsizing or moving to a cheaper area an option?

Skibunny40

lisyloo wrote: »

Do you both have full state pensions?
Any serps?
Do you own your own home?
Is downsizing or moving to a cheaper area an option?

We should both have full state pensions by the time we retire - aiming to retire around 60, so will keep an eye on requirements in case they change but at the moment it looks okay.

Yes, we own our own home and it's mortgage free. Not keen on downsizing, as the house was originally a bungalow with proper downstairs bathroom and bedroom so will be ideal in our later years - but still with room for visitors.

If ( and it's a big if!) I've got the sums right, we should have around £30k pa from age 60 - 80 including state pension from 67/68 onwards . There's also the possibility of an inheritance, but I don't want to assume anything...

Audaxer

Skibunny40 wrote: »

If ( and it's a big if!) I've got the sums right, we should have around £30k pa from age 60 - 80 including state pension from 67/68 onwards . There's also the possibility of an inheritance, but I don't want to assume anything...

Do you need £30k per annum from age 60, if you think you are going to run out of money apart from SPs by 80? If it was me, I would plan for a lesser annual amount so as not to risk running out of money.

squirrelpie

Do you need £30k per annum from age 60, if you think you are going to run out of money apart from SPs by 80? If it was me, I would plan for a lesser annual amount so as not to risk running out of money.

+1 (plus some more characters to make it postable)

Skibunny40

Audaxer wrote: »

Do you need £30k per annum from age 60, if you think you are going to run out of money apart from SPs by 80? If it was me, I would plan for a lesser annual amount so as not to risk running out of money.

So if we aim for a lesser amount each year, say £25kpa, would you take out an annuity with the difference (£5kpa x 20 years = £100k annuity) or just keep spending at £25kpa for longer? I'm assuming the annuity would be around £3.5k pa in perpetuity...

AnotherJoe

You will find that taking out an annuity with the money you were planning on burning down might give you a longer run but at your age you should know there's no such thing as a free lunch and you'll be very disappointed with the income.
Why don't you stay as you were, spending while you are healthy and can enjoy it and plan on downsizing to release more money if you need it around age 75 or take equity release.