£45k pension offer OF £2014Pa

ali_bear

The annuity valuator at https://lategenxer.streamlit.app/Annuity_Valuator says an index linked £2512 pa at age 67 is worth £43,727

kermchem

https://forums.moneysavingexpert.com/discussion/comment/82054293#Comment_82054293

Problem is that I don't think that at age 67 you can take £45K, invest it to produce a return of £2512 per year (over 5% return is not sustainable), with a guarantee of up to 5% inflation linking, and a certainty that it will pay out every year until you are 87 or 107. And, with no need for the pensioner to do anything in terms of asset management other than check their current account each month, and once in a while prove they are alive to the pension scheme.

If this is a defined benefit pension, then it is "worth" £2512 per year with some index linking. There are other "worth"'s or values involving a lump sum and a lower annual payment. The pension scheme might be willing to let you escape from their books in return for some sum, that might be £45K, but it might cost at least £5K in fees for a financial adviser to collect personal data, write a report and cover it with their professional indemnity insurance. And when the £40K runs out?

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82054293#Comment_82054293

You could also invest £45K and then hit a prolonged slump in the markets. So potentially no return for years and a loss of capital.

On the other hand the £2500 pa with annual increases is guaranteed.

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/82054293#Comment_82054293

A 'safe' withdrawal rate is no more than 4%, probably more like 3.5% - and even that could be optimistic if you were very unlucky. 4% of £45k is just £1.8k pa so although you theoretically could get a higher return it seems unlikely.

The only sensible comparison is to an open market annuity.