Telegraph annuity figures. Unbelievable?

Albermarle

GenX0212 said:

I was looking at fixed term annuities to cover the gap between retirement and SP and was quite surprised. According to MoneyHelper £100k would buy £12.5k for a 10yr term. So spending £300k of my current £600k plus my DB pension would get me to SP age with an income of about £50k and still £300k left in the pot for growth. Seems quite an attractive option but the other part of my brain says that if they are willing to offer this then there must be some reasonable confidence of growth over the next 10 yrs so sticking with investments might be better?

I'm currently Confused.com as to what to do for the best  

Remember in real terms the value of the annual payment goes down every year due to inflation.
So if the annuity provider can invest the money in a way that just keeps up with inflation, but pays you the same amount each year, then it adds up more.

With inflation at 3% pa, your final year payment could only buy you goods and services worth about £9,000 today.

michaels

Bostonerimus1 said:

QrizB said:

This article?

https://www.telegraph.co.uk/money/most-hated-financial-product-really-need/

At today’s top rates, £100,000 buys a 75-year-old £9,500 a year of income, according to broker Hub Financial.

That’s a 9.5pc yield – pretty punchy when you consider the FTSE 100 is currently yielding 3.5pc. It also beats the total return (dividend and capital gains) of London’s blue-chip index over the past 20 years (6.3pc).

Now let’s say you want the annuity to pay out 50pc to your wife or husband and to increase with inflation every year. Even with these conditions, your £100,000 will provide £7,750 annually (increasing every year).

There was a time when I admired a lot of the writing in the Telegraph, but this is a seriously misleading comparison between annuities and DC invested drawdown. The annuity payout rate is NOT a yield and includes return of capital as well as a mortality credit. Most people will probably be better off with DC drawdown. Where annuities win out is that they eliminate the risk of DC drawdown, but financially for funding retirement they will almost always be worse than DC drawdown in purely financial terms.

This! Would certainly be misrepresentation if stated by an IFA.

Bostonerimus1

michaels said:

Bostonerimus1 said:

QrizB said:

This article?

https://www.telegraph.co.uk/money/most-hated-financial-product-really-need/

At today’s top rates, £100,000 buys a 75-year-old £9,500 a year of income, according to broker Hub Financial.

That’s a 9.5pc yield – pretty punchy when you consider the FTSE 100 is currently yielding 3.5pc. It also beats the total return (dividend and capital gains) of London’s blue-chip index over the past 20 years (6.3pc).

Now let’s say you want the annuity to pay out 50pc to your wife or husband and to increase with inflation every year. Even with these conditions, your £100,000 will provide £7,750 annually (increasing every year).

There was a time when I admired a lot of the writing in the Telegraph, but this is a seriously misleading comparison between annuities and DC invested drawdown. The annuity payout rate is NOT a yield and includes return of capital as well as a mortality credit. Most people will probably be better off with DC drawdown. Where annuities win out is that they eliminate the risk of DC drawdown, but financially for funding retirement they will almost always be worse than DC drawdown in purely financial terms.

This! Would certainly be misrepresentation if stated by an IFA.

It's an unacceptable level of ignorance from anyone trying to explain annuities vs DC drawdown, I expect a little care and research from a journalist, but I suppose we don't need "experts" anymore.

Albermarle

Bostonerimus1 said:

michaels said:

Bostonerimus1 said:

QrizB said:

This article?

https://www.telegraph.co.uk/money/most-hated-financial-product-really-need/

At today’s top rates, £100,000 buys a 75-year-old £9,500 a year of income, according to broker Hub Financial.

That’s a 9.5pc yield – pretty punchy when you consider the FTSE 100 is currently yielding 3.5pc. It also beats the total return (dividend and capital gains) of London’s blue-chip index over the past 20 years (6.3pc).

Now let’s say you want the annuity to pay out 50pc to your wife or husband and to increase with inflation every year. Even with these conditions, your £100,000 will provide £7,750 annually (increasing every year).

There was a time when I admired a lot of the writing in the Telegraph, but this is a seriously misleading comparison between annuities and DC invested drawdown. The annuity payout rate is NOT a yield and includes return of capital as well as a mortality credit. Most people will probably be better off with DC drawdown. Where annuities win out is that they eliminate the risk of DC drawdown, but financially for funding retirement they will almost always be worse than DC drawdown in purely financial terms.

This! Would certainly be misrepresentation if stated by an IFA.

It's an unacceptable level of ignorance from anyone trying to explain annuities vs DC drawdown, I expect a little care and research from a journalist, but I suppose we don't need "experts" anymore.

I think you are maybe setting the bar a bit high........

Bostonerimus1

Albermarle said:

Bostonerimus1 said:

michaels said:

Bostonerimus1 said:

QrizB said:

This article?

https://www.telegraph.co.uk/money/most-hated-financial-product-really-need/

At today’s top rates, £100,000 buys a 75-year-old £9,500 a year of income, according to broker Hub Financial.

That’s a 9.5pc yield – pretty punchy when you consider the FTSE 100 is currently yielding 3.5pc. It also beats the total return (dividend and capital gains) of London’s blue-chip index over the past 20 years (6.3pc).

Now let’s say you want the annuity to pay out 50pc to your wife or husband and to increase with inflation every year. Even with these conditions, your £100,000 will provide £7,750 annually (increasing every year).

There was a time when I admired a lot of the writing in the Telegraph, but this is a seriously misleading comparison between annuities and DC invested drawdown. The annuity payout rate is NOT a yield and includes return of capital as well as a mortality credit. Most people will probably be better off with DC drawdown. Where annuities win out is that they eliminate the risk of DC drawdown, but financially for funding retirement they will almost always be worse than DC drawdown in purely financial terms.

This! Would certainly be misrepresentation if stated by an IFA.

It's an unacceptable level of ignorance from anyone trying to explain annuities vs DC drawdown, I expect a little care and research from a journalist, but I suppose we don't need "experts" anymore.

I think you are maybe setting the bar a bit high........

Yes, sorry, outside of the usual political propaganda I still expect the articles in major UK papers to contain accurate and useful information...I know that's very quaint. So if they publish a recipe for a sponge cake it should say add "2 eggs" not "200" and similarly they should not confuse annuity payout rate with investment return.