Annuity’s Becoming More Attractive?

GSP

Malthusian said:

If you did buy a fixed term annuity, what would you do with the maturity value at the end? 
If the answer is "buy another fixed term annuity and hope rates haven't dropped", why not just buy a lifetime annuity?

Yes it’s a lot to weigh up!
My SP due in six years, my wife’s SP in 11 years.
And quite how we should build this into the equation?

Linton

GSP said:

Malthusian said:

If you did buy a fixed term annuity, what would you do with the maturity value at the end? 
If the answer is "buy another fixed term annuity and hope rates haven't dropped", why not just buy a lifetime annuity?

Yes it’s a lot to weigh up!
My SP due in six years, my wife’s SP in 11 years.
And quite how we should build this into the equation?

The older you are when you buy an annuity the less it costs for a given level of income.  Therefore it may make sense to start with drawdown but buy an annuity when/if you reach, say, 80.

One way of building this into the equation is for you to base your calculations on a moderately cautious drawdown.  You can then buy an annuity if it is worthwhile when the time is appropriate.

DT2001

I think it depends on your income requirements, now and when you SP’s kick in. Also how flexible you can/want to be.
As you say there are many scenarios. I’d look at buying a fixed term annuity until SPA for the SP equivalent just to give a guaranteed amount. I have a DB of £9k which gives me comfort when the stock market/pension are dipping.

GSP

Linton said:

GSP said:

Malthusian said:

If you did buy a fixed term annuity, what would you do with the maturity value at the end? 
If the answer is "buy another fixed term annuity and hope rates haven't dropped", why not just buy a lifetime annuity?

Yes it’s a lot to weigh up!
My SP due in six years, my wife’s SP in 11 years.
And quite how we should build this into the equation?

The older you are when you buy an annuity the less it costs for a given level of income.  Therefore it may make sense to start with drawdown but buy an annuity when/if you reach, say, 80.

One way of building this into the equation is for you to base your calculations on a moderately cautious drawdown.  You can then buy an annuity if it is worthwhile when the time is appropriate.

Thanks. Reading your post, I can’t imagine being 80! And in 20 years time with the rate of change going on now, quite what our world will look like. 

Indeed regarding investments etc we can only be reactive to what’s available at the time, which may be quite different as well.

GSP

DT2001 said:

I think it depends on your income requirements, now and when you SP’s kick in. Also how flexible you can/want to be.
As you say there are many scenarios. I’d look at buying a fixed term annuity until SPA for the SP equivalent just to give a guaranteed amount. I have a DB of £9k which gives me comfort when the stock market/pension are dipping.

Yes it’s difficult to know what to do.
I had no vision of buying an annuity a while back as rates were so low and the low return meant they weren’t even on the radar.
It’s a case of taking the opportunity perhaps in this possibly fairly short window with higher rates. Or just keeping the same strategy and leaving it all invested in markets mainly, and letting ‘it ride’?

westv

One thing that wont change is that males in good health will be slightly worse off compared to past times whatever happens to rates.

michaels

Is it possible to buy a fixed term index linked annuity - basically to 'replace' the state pension in the period from (early) retirement to state pension age?

FIREDreamer

If I used my drawdown pot to buy a JL 50% spouse RPI linked annuity I could retire now (annuity is greater than post Sal sac salary) but unfortunately I am struggling with the concept of giving my pot away whilst drawdown may provide higher lifetime income, obvious not guaranteed. It’s a big problem for me, albeit a first world problem.

kinger101

FIREDreamer said:

If I used my drawdown pot to buy a JL 50% spouse RPI linked annuity I could retire now (annuity is greater than post Sal sac salary) but unfortunately I am struggling with the concept of giving my pot away whilst drawdown may provide higher lifetime income, obvious not guaranteed. It’s a big problem for me, albeit a first world problem.

Remember, it's not all or nothing.  You could buy an annuity with some of your pot to get a comfortable base income and use the remainder in drawdown.

FIREDreamer

kinger101 said:

FIREDreamer said:

If I used my drawdown pot to buy a JL 50% spouse RPI linked annuity I could retire now (annuity is greater than post Sal sac salary) but unfortunately I am struggling with the concept of giving my pot away whilst drawdown may provide higher lifetime income, obvious not guaranteed. It’s a big problem for me, albeit a first world problem.

Remember, it's not all or nothing.  You could buy an annuity with some of your pot to get a comfortable base income and use the remainder in drawdown.

I realise that.

Leaving x in my pot to cover a notional state pension up to state pension age and annuitising the rest is another possibility.

I guess there’s a lot to be said for a worry free retirement too.

I do have 2 small DB pensions already in payment, with capped CPI increases not great last year or this.

Strange really when not so long ago many people wanted to go the other way, swapping a guaranteed DB for a transfer value! I would never have done that.