Current annuity rates

dunstonh

B ) Having looked at UK’s IFA qualification requirements I seriously doubt most would tell the difference between Monte Carlo and Monaco.  I am sure they can fill in a screen with numbers and click a button though. S-t in, s-t out. 

Clearly you haven't looked.

C) I don’t need a holistic overview.  I have my Investment Policy Statement and work to that. I need an annuity specialist rather than an IFA who would tell me that he knows better what his client needs than the client.  I also need to avoid consultants who use the word “holistic”.

We know you anti-IFA and completely biased but this is getting petty.

D) You may want to take your argument on terminology to these guys https://www.onlinemoneyadvisor.co.uk/pensions/pension-annuities/annuity-advisors/

So, a firm called "FIND A MORTGAGE ONLINE LTD"  that is unregulated and has a webpage about annuities is your definition of a specialist?

westv

How did a thread about annuities end up with a debate about the merits or otherwise of IFAs? 

Linton

I am struggling to think of how a Monte Carlo simulation would help me decide which annuity is most appropriate for my circumstances, wishes, and needs.  Perhaps the situation in the US differs in some way from the UK. I guess insurance companies may use such methods in designing their annuity offerings to profitably satisfy market requirements for annuities but when working on the needs of an individual they seem totally irrelevent.

[Deleted User]

Linton said:

I am struggling to think of how a Monte Carlo simulation would help me decide which annuity is most appropriate for my circumstances, wishes, and needs.  Perhaps the situation in the US differs in some way from the UK. I guess insurance companies may use such methods in designing their annuity offerings to profitably satisfy market requirements for annuities but when working on the needs of an individual they seem totally irrelevent.

Its not the only consideration by any means but I want to understand risk pooling vs risk premium for an annuity.  And to estimate this I need to run multiple Monte Carlo simulations.  

In other words, I want to understand what the annuity provider charges for the service of taking the burden of some risk off my hands so I need to try and reproduce their analysis.  This would also tell me whether a particular option is priced competitively. For example if the margin on CPI annuity vs a 3% escalating annuity is 70% higher, it would impact my choice.  The other reason to use Monte Carlo simulations is similar: to understand if you can handle a particular risk yourself in a more cost efficient manner than to let an annuity provider pool this risk for you. 

[Deleted User]

dunstonh said:

B ) Having looked at UK’s IFA qualification requirements I seriously doubt most would tell the difference between Monte Carlo and Monaco.  I am sure they can fill in a screen with numbers and click a button though. S-t in, s-t out. 

Clearly you haven't looked.

C) I don’t need a holistic overview.  I have my Investment Policy Statement and work to that. I need an annuity specialist rather than an IFA who would tell me that he knows better what his client needs than the client.  I also need to avoid consultants who use the word “holistic”.

We know you anti-IFA and completely biased but this is getting petty.

D) You may want to take your argument on terminology to these guys https://www.onlinemoneyadvisor.co.uk/pensions/pension-annuities/annuity-advisors/

So, a firm called "FIND A MORTGAGE ONLINE LTD"  that is unregulated and has a webpage about annuities is your definition of a specialist?

I am merely demonstrating that the following statement is an obvious lie:

” Also, nobody labels themselves as annuity specialist it’s in the UK.”  Purely factual claim which happens to be false. In fact there are lots of people and companies in the UK who claim they are annuity specialists.  Whether they all are or not is questionable and individual qualifications and experience have to be established but the original claim was a lie, 

Linton

Deleted_User said:

Linton said:

I am struggling to think of how a Monte Carlo simulation would help me decide which annuity is most appropriate for my circumstances, wishes, and needs.  Perhaps the situation in the US differs in some way from the UK. I guess insurance companies may use such methods in designing their annuity offerings to profitably satisfy market requirements for annuities but when working on the needs of an individual they seem totally irrelevent.

Its not the only consideration by any means but I want to understand risk pooling vs risk premium for an annuity.  And to estimate this I need to run multiple Monte Carlo simulations.  

In other words, I want to understand what the annuity provider charges for the service of taken the burden of some risk of my hands so I need to try and reproduce their analysis.  This would also tell me whether a particular option is priced competitively.  The other reason to use Monte Carlo simulations is similar: to understand if you can handle a particular risk yourself in a more cost efficient manner than to let an annuity provider pool this risk for you. 

I cannot see most customers wanting to understand the details of the provider fees against the service.  The only factors that really matter are firstly what  the annuity offers and then the total cost.  Whether that cost arises from high or low fees,  good or poor financial  management etc etc is irrelevent. Same as buying anything else, do you base your choice of car on the manufacturer's balance sheet?

Perhaps one important factor that may be different in the US is that annuities are protected by the FSCS, so the provider going bust is not an issue.  Other than idle curiousity why would an ordinary customer want to know about risk pooling vs risk premium?  Those are surely issues for the annuity provider.

[Deleted User]

Linton said:

Deleted_User said:

Linton said:

I am struggling to think of how a Monte Carlo simulation would help me decide which annuity is most appropriate for my circumstances, wishes, and needs.  Perhaps the situation in the US differs in some way from the UK. I guess insurance companies may use such methods in designing their annuity offerings to profitably satisfy market requirements for annuities but when working on the needs of an individual they seem totally irrelevent.

Its not the only consideration by any means but I want to understand risk pooling vs risk premium for an annuity.  And to estimate this I need to run multiple Monte Carlo simulations.  

In other words, I want to understand what the annuity provider charges for the service of taken the burden of some risk of my hands so I need to try and reproduce their analysis.  This would also tell me whether a particular option is priced competitively.  The other reason to use Monte Carlo simulations is similar: to understand if you can handle a particular risk yourself in a more cost efficient manner than to let an annuity provider pool this risk for you. 

I cannot see most customers wanting to understand the details of the provider fees against the service.  The only factors that really matter are firstly what  the annuity offers and then the total cost.  Whether that cost arises from high or low fees,  good or poor financial  management etc etc is irrelevent. Same as buying anything else, do you base your choice of car on the manufacturer's balance sheet?

Perhaps one important factor that may be different in the US is that annuities are protected by the FSCS, so the provider going bust is not an issue.  Other than idle curiousity why would an ordinary customer want to know about risk pooling vs risk premium?  Those are surely issues for the annuity provider.

Annuities are protected by the state almost everywhere. Which still carries a risk. Back to Monte Carlo and premiums…

I strongly disagree that understanding how the risk is priced and premium shouldn’t be looked at.  Certain annuity options are priced much more competitively.  Certain sections of the market are “niche” and providers can charge a large margin.  Its a simple matter of pounds in your pocket or providers.  People might be happy that Rolls Royce charges a huge premium just so they can brag. Thats not what annuity is about. 

zagfles

westv said:

zagfles said:

Albermarle said:

You can always hedge your bets and have a fixed 3% pa increase. More expensive than level but cheaper than inflation link.

What's the point? 3% might be more or less than inflation. Maybe much more or less. Why not just stick with equities and drawdown if you want to take a risk?

At least with fixed increases you can see with 100% certainty where you would start to be better off than a level annuity.

Why would that be important to anyone?

[Deleted User]

zagfles said:

westv said:

zagfles said:

Albermarle said:

You can always hedge your bets and have a fixed 3% pa increase. More expensive than level but cheaper than inflation link.

What's the point? 3% might be more or less than inflation. Maybe much more or less. Why not just stick with equities and drawdown if you want to take a risk?

At least with fixed increases you can see with 100% certainty where you would start to be better off than a level annuity.

Why would that be important to anyone?

Seems obvious. People have some idea of personal life expectancy and spending plans. This helps to compare options.

Linton

Deleted_User said:

Linton said:

Deleted_User said:

Linton said:

I am struggling to think of how a Monte Carlo simulation would help me decide which annuity is most appropriate for my circumstances, wishes, and needs.  Perhaps the situation in the US differs in some way from the UK. I guess insurance companies may use such methods in designing their annuity offerings to profitably satisfy market requirements for annuities but when working on the needs of an individual they seem totally irrelevent.

Its not the only consideration by any means but I want to understand risk pooling vs risk premium for an annuity.  And to estimate this I need to run multiple Monte Carlo simulations.  

In other words, I want to understand what the annuity provider charges for the service of taken the burden of some risk of my hands so I need to try and reproduce their analysis.  This would also tell me whether a particular option is priced competitively.  The other reason to use Monte Carlo simulations is similar: to understand if you can handle a particular risk yourself in a more cost efficient manner than to let an annuity provider pool this risk for you. 

I cannot see most customers wanting to understand the details of the provider fees against the service.  The only factors that really matter are firstly what  the annuity offers and then the total cost.  Whether that cost arises from high or low fees,  good or poor financial  management etc etc is irrelevent. Same as buying anything else, do you base your choice of car on the manufacturer's balance sheet?

Perhaps one important factor that may be different in the US is that annuities are protected by the FSCS, so the provider going bust is not an issue.  Other than idle curiousity why would an ordinary customer want to know about risk pooling vs risk premium?  Those are surely issues for the annuity provider.

Annuities are protected by the state almost everywhere. Which still carries a risk. Back to Monte Carlo and premiums…

I strongly disagree that understanding how the risk is priced and premium shouldn’t be looked at.  Certain annuity options are priced much more competitively.  Certain sections of the market are “niche” and providers can charge a large margin.  Its a simple matter of pounds in your pocket or providers.  People might be happy that Rolls Royce charges a huge premium just so they can brag. Thats not what annuity is about. 

A cheap annuity that doesnt do what you want is surely pointless. If there are two annuities that do what you want then the cheapest would seem to be a sensible option.  Why one is cheaper than the other is irrelevent.