Thoughts on partial annuity with £1M dc pot

Steve_666_

"It's interesting that you consider that "superior"; those figures mean that someone buying an annuity at 65 would need to live till 83 before they were better off, having sacrificed a significant chunk of their income in their most active years."

I fully intend to live way beyond 83, and therefore am basing all my planning on that. For this guy, he is in his mid 50's, therefore needs to look forward 30+ years

Moonwolf

How about a fixed term annuity, just until SPA then review it.  This has the added advantage that you will have a better idea of your retirement lifestyle by then and the level of security versus flexibility that you want.

Albermarle

SouthCoastBoy said:

My opinion is i would only take out an annuity with inflation protection, otherwise you are only swapping one risk for another.

I have considered annuities but my wife has a small local authority db pension, so that coupled with 2 state pensions should cover us for essentials.

I think there is a halfway house, where you can have an annuity with a fixed ( or even capped) increase each year. Presumably a bit cheaper than a full RPI link, but gives some protection, assuming inflation does not stay in double figures for an elongated period. 

Malthusian

Albermarle said:

I think there is a halfway house, where you can have an annuity with a fixed ( or even capped) increase each year. Presumably a bit cheaper than a full RPI link, but gives some protection, assuming inflation does not stay in double figures for an elongated period. 

Annuities with capped RPI increases are totally useless. The only reason to buy an annuity with index-linking is that you are afraid that high inflation will be around forever, or at least the next few decades. (As illustrated by the break-even figures in my last post.) An annuity with capped RPI increases is the worst of both worlds; the cap takes away the only thing that makes it useful.
Capped RPI increases make more sense for defined benefit schemes because they make them slightly less unaffordable, and the members aren't being asked to choose between inflation protection or higher income. 

Steve_666_ said:

I fully intend to live way beyond 83, and therefore am basing all my planning on that. For this guy, he is in his mid 50's, therefore needs to look forward 30+ years

That doesn't mean ignoring the 26 years he has before 84 to focus exclusively on possibly being richer after 84. 
I'll reiterate that over half his fund is going to remain in drawdown which can be invested for long term growth, with a reasonable hope of keeping pace with or even beating inflation, and which can be drawn on at any time he starts to feel straitened by his annuity and triple-locked State Pension.