imcome drawdown/unsecured pension or annuity

ivavoucher

Is there a point (amount of £££) when an usecured pension is always better than an annuity.

or is it down to circumtances such as age and health (smoker)

Thanks

dunstonh

Its not so much a point of being better but whether you accept investment risk against guaranteed income. Historically, the figure of 100k plus was considered the point you should consider drawdown as it was believed that you could afford to take the risk with the income.

Poor health and smokers get better annuity rates but also potentially shorter lives so either option could be better in different circumanstances.

The younger you are, the more likely drawdown is going to be better as annuity rates are pretty poor if you are under 65.

ivavoucher

I checked the annuity rates on moneymadeclear.co.uk and it seems that there is little to be gained by waiting to draw.

I was surprised at there not being much difference between starting at 52, 55 or even 60.

As in: £24 per month below.

: A £300,000 fund, with 10 year guarantee, joint life both ages 52, and partner will receive 100% (smoker) £1,393 per month.

: A £300,000 fund, with 10 year guarantee, joint life both ages 55, and partner will receive 100% (smoker) £1,417 per month



Is it always advisable to draw the max cash before unsecured pension or annuity?

We have multiple pension policies; I am expecting advice that the funds need to be moved/consolidated at a cost/commission, is this always necessary prior to drawing?

Do people normally take advice from more than one advisor? (HSBC portfolio manager)



Thanks

dunstonh

Is it always advisable to draw the max cash before unsecured pension or annuity?

Usually. Guaranteed annuity rates can mean that its best not to.

We have multiple pension policies; I am expecting advice that the funds need to be moved/consolidated at a cost/commission, is this always necessary prior to drawing?

Consolidating them with an annuity can be done at time of commencement. It doesnt need to be done before although it can be slightly cheaper to get them all in the one source if you are doing annuity purchase. That really depends on the annuity provider.

Do people normally take advice from more than one advisor? (HSBC portfolio manager)

Not normally but you should use an IFA and not one that is employed by a salesforce. HSBC portfolio management is very expensive.

EdInvestor

Assuming that the investment risk is acceptable, the other advantage of drawdown for younger people is that it offers the opportuinuty that your fund will grow while you are taking income, and thus your income can rise in future.

An annuity is a "cliff edge" product which locks you into a gilt based income on a specific lump of capital for life, which can be 30+ years. This is very risky as inflation will halve the spending power oif thew income in 20 years.

Annuities were really designed for an earlier age where people only lived for around 10 years after they retired: they aren't suited to today's longevity, though they may be useful if bought at age 75, when they would approximate their original function.

Of course there is a risk that your income might go down, and that is why it is important to make sure that the investment strategy is optimal and if possible, that the charges are low.