'Annuities are poor value' - what do they know that we don't?

Thrugelmir

westv said:

I wonder what annuity rates were in the 1920s and 30s?

Life expectancy was very different. 

arnoldy

shinytop said:

But I'd still rather have a DB pension.

Not if inflation takes off, DB pensioners will be consigned to a gentle decline into poverty. Increasingly experts predict that Governments will inflate away the unsustainable CoVid debts (look up "financial repression" as well).
All (virtually) private sector DB pensions are CPI with cap that varies 0 - 2.5% - 5% depending on date of accrual. 
[Public sector pensions are usually 100% inflation proof - truly a gold and diamond encrusted parallel universe. Well done if you have one of these]

Thrugelmir

arnoldy said:

shinytop said:

But I'd still rather have a DB pension.

Not if inflation takes off, DB pensioners will be consigned to a gentle decline into poverty. Increasingly experts predict that Governments will inflate away the unsustainable CoVid debts (look up "financial repression" as well).
All (virtually) private sector DB pensions are CPI with cap that varies 0 - 2.5% - 5% depending on date of accrual. 
[Public sector pensions are usually 100% inflation proof - truly a gold and diamond encrusted parallel universe. Well done if you have one of these]

If DB schemes are linked to inflation why is the value going to be eroded?  BOE's mandate is to control inflation at around 2%. Well within the cap. 

zagfles

Thrugelmir said:

arnoldy said:

shinytop said:

But I'd still rather have a DB pension.

Not if inflation takes off, DB pensioners will be consigned to a gentle decline into poverty. Increasingly experts predict that Governments will inflate away the unsustainable CoVid debts (look up "financial repression" as well).
All (virtually) private sector DB pensions are CPI with cap that varies 0 - 2.5% - 5% depending on date of accrual. 
[Public sector pensions are usually 100% inflation proof - truly a gold and diamond encrusted parallel universe. Well done if you have one of these]

If DB schemes are linked to inflation why is the value going to be eroded?  BOE's mandate is to control inflation at around 2%. Well within the cap. 

That mandate isn't fixed in the constitution. It could be changed by political will.

Thrugelmir

zagfles said:

Thrugelmir said:

arnoldy said:

shinytop said:

But I'd still rather have a DB pension.

Not if inflation takes off, DB pensioners will be consigned to a gentle decline into poverty. Increasingly experts predict that Governments will inflate away the unsustainable CoVid debts (look up "financial repression" as well).
All (virtually) private sector DB pensions are CPI with cap that varies 0 - 2.5% - 5% depending on date of accrual. 
[Public sector pensions are usually 100% inflation proof - truly a gold and diamond encrusted parallel universe. Well done if you have one of these]

If DB schemes are linked to inflation why is the value going to be eroded?  BOE's mandate is to control inflation at around 2%. Well within the cap. 

That mandate isn't fixed in the constitution. It could be changed by political will.

Deflation is possibly the greater danger. Japanese style. 

westv

Thrugelmir said:

westv said:

I wonder what annuity rates were in the 1920s and 30s?

Life expectancy was very different. 

We all know that.

Thrugelmir

westv said:

Thrugelmir said:

westv said:

I wonder what annuity rates were in the 1920s and 30s?

Life expectancy was very different. 

We all know that.

Those fortunate enough to be able to purchase annuities, if they so wished,  were also in the minority. Wasn't a middle class to speak of. 

mark55man

A lot of DB schemes are capped at 3% or 5% so much higher inflation would be damaging.  However, I agree that deflation is more likely to be a risk following the amount of QE that needs to be unwound (see Japan's lost decades).  However in a 30 year retirement it might be a problem later - BUT state pension can be relied on (I believe) to not trail inflation by too much and can in any case be deferred for some extra protection, AND it is (again I believe) commonly overestimated how much people are able to spend as they head into their 90s and above. 

Therefore I am more convinced now than ever that some form of annuity / DB is a good idea for essential spending (but with some DC  for contingency/legacy) 

shinytop

arnoldy said:

shinytop said:

But I'd still rather have a DB pension.

Not if inflation takes off, DB pensioners will be consigned to a gentle decline into poverty. Increasingly experts predict that Governments will inflate away the unsustainable CoVid debts (look up "financial repression" as well).
All (virtually) private sector DB pensions are CPI with cap that varies 0 - 2.5% - 5% depending on date of accrual. 
[Public sector pensions are usually 100% inflation proof - truly a gold and diamond encrusted parallel universe. Well done if you have one of these]

Not if they also have a decent sized DC pension they won't ...