Decision Time

westv

Audaxer wrote: »

Yes, a bit bearish, but I think 2015 and the end of 2018 were classed more as corrections in the long bull market run.

Surely all bear markets are corrections unless they are crashes.

Malthusian

westv wrote: »

Surely all bear markets are corrections unless they are crashes.

Only crashes are deemed to be bear markets.

Wikipedia says a crash is at least 20%, which is as good a definition as any. On some indices the 2015 "correction" approached 20%, but the real reason the 2015 fall wasn't a crash is because almost nobody thinks of it as a crash.

I can't even remember what the supposed reason for it was. Something to do with China? That's definitely not the case with a crash like the ones in 2008 and 2000.

choi wrote:

There could be bumpy times ahead with Boris and Brexit

There are always bumpy times ahead in the stockmarket. Brexit and Boris are obscure localised issues that almost nobody in the global economy cares about (less than 1% of the global population).

choi

wjr4 wrote: »

Are you comfortable losing money if we have a stock market crash? Why are you taking 50% spouse benefits AND 100% value protection?

I am not comfortable with risk

I was taking 50%Spouse to provide for my wife should I die
100% Value Protection to leave some money for my family should we both die too soon

choi

Audaxer wrote: »

There is no way that your IFA can guarantee that your investment will rise 3-5% per year after fees in a 5 year time frame. As we have had a long bull run over the past 10 years, we could well have a bear market over the next 5 years, and the value of your investment could be lower in 5 years time.

I do agree with investing the money rather than buying an annuity at this time, but a 20 year timeframe is more realistic for saying average growth of 3-5% after fees could be expected.

In 20 years time I would be 87 if still alive
If as you say we hit bad times my pension pot could fall dramatically over the next few years and struggle to increase

Annuity on this basis looks a better option
Even though return is very low

Audaxer

choi wrote: »

In 20 years time I would be 87 if still alive
If as you say we hit bad times my pension pot could fall dramatically over the next few years and struggle to increase

Annuity on this basis looks a better option
Even though return is very low

If £250k was to remain invested in a medium risk/volatility portfolio, you should be able to draw at least 3% (£7,500) per year, increasing with inflation each year, without running out of money throughout a long retirement. Looks better to me than an annuity of only £6,600 per year with 50% spouse protection.

choi

Audaxer wrote: »

If £250k was to remain invested in a medium risk/volatility portfolio, you should be able to draw at least 3% (£7,500) per year, increasing with inflation each year, without running out of money throughout a long retirement. Looks better to me than an annuity of only £6,600 per year with 50% spouse protection.

So I should versus I will

Draw down option is a possibility

Annuity option is a certainty

Plus if my wife and I die my estate gets any money left

jamesd

To start, that annuity is paying 2.64% of the capital amount spent. So, lets look at how to do better.

State pension deferral for you and spouse. I don't know your actual amounts so I'll assume 8500 a year each. For each year you defer claiming it's increased by 5.8%, pro-rated for less. The extra increases with CPI. Say you each deferred for 7 years and drew 17000 a year from the pension cash to replace the 8500 you're not taking. After the 7 years you'd have drawn out and spent 8500 * 7 * 2 = 119000. Your state pensions will each be higher by 8500 * 0.058 * 7 = 3451, so 6902.

So: instead of 6600 RPI and the money gone this gets you 6902 CPI and you have 131000 change. Same 50% spousal, though you can get more or less by adjusting deferral time

At this point you might grimace and realise why annuities around retirement age are thought of as bad value for money.

No need for anything other than cash while deferring. Strictly this is drawdown but done without investment risk.

Audaxer

jamesd wrote: »

To start, that annuity is paying 2.64% of the capital amount spent. So, lets look at how to do better.

State pension deferral for you and spouse. I don't know your actual amounts so I'll assume 8500 a year each. For each year you defer claiming it's increased by 5.8%, pro-rated for less. The extra increases with CPI. Say you each deferred for 7 years and drew 17000 a year from the pension cash to replace the 8500 you're not taking. After the 7 years you'd have drawn out and spent 8500 * 7 * 2 = 119000. Your state pensions will each be higher by 8500 * 0.058 * 7 = 3451, so 6902.

So: instead of 6600 RPI and the money gone this gets you 6902 CPI and you have 131000 change. Same 50% spousal, though you can get more or less by adjusting deferral time

At this point you might grimace and realise why annuities around retirement age are thought of as bad value for money.

No need for anything other than cash while deferring. Strictly this is drawdown but done without investment risk.

That seems a great solution. If I understand it correctly after 7 years deferral when OP and his wife takes State Pension, they will get around £12k each in SP rather than £8.5k SP each plus a £6,600 annuity between them, and still have £131k cash plus interest accrued left. They could use that cash to buy an annuity at a later stage in retirement. Seems a no brainer.

jsinc

Audaxer wrote: »

That seems a great solution. If I understand it correctly after 7 years deferral when OP and his wife takes State Pension, they will get around £12k each in SP rather than £8.5k SP each plus a £6,600 annuity between them, and still have £131k cash plus interest accrued left. They could use that cash to buy an annuity at a later stage in retirement. Seems a no brainer.

Not 'plus a £6,600 annuity between them'. And post above says his wife retires in 6 years, so sums would be different. But still an interesting comparison exercise.

Audaxer

jsinc wrote: »

Not 'plus a £6,600 annuity between them'. And post above says his wife retires in 6 years, so sums would be different. But still an interesting comparison exercise.

I said the option proposed amounts to around £12k per annum each once they get their deferred SPs, rather than the OPs choice of a £6,600 annuity and SPs of £8.5k each, and because they will still have a significant amount of cash under jamesd's suggestion.