Fixed term annuity vs Drawdown

Spivo46

£375,000 pension pot converted to a fixed term annuity over 25 years = £ 28,800 a year.

Drawdown approach at a 4% withdrawal rate = £15,000 a year.

With decent cash pot invested in an ISA alongside this, What am i missing here? Is this a no brainer?

NoMore

The usual 4% 'rule' includes increasing the withdrawals by inflation to maintain spending power, is the annuity index linked ?

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/82081473#Comment_82081473

Thanks, no, not index linked

Marcon

How old are you?

NoMore

Also, you could have capital left after 25 years with the 4%.

It's worth considering the annuity, don't really know your full picture but it's not necessarily a no brainer.

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/82081510#Comment_82081510

67 - and with that income i would find it easy to contribute to savings monthly incase i did live beyond 92!

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/82081512#Comment_82081512

I think i would have capital left over considering i would take from savings during market downturns etc. However the FTA provides a very heathy income that allows me to save monthly

Marcon

The big attraction of a FTA, especially as you get older, is the lack of action/worrying needed if markets plunge…

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/82081520#Comment_82081520

And its guaranteed to continue to pay out for the full 25 years if i snuff it

bolwin1

Does that include any death benefits ? If not, that's why it appears to be so generous. As a 67 year old you've got a roughly 30% chance of hitting 92 (higher if you are a woman).

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/82081537#Comment_82081537

this product continues to pay out to dependants for the full 25 year term (unlike the standard/basic annuity).

7.4% return is mad