Income drawdown vs annuity purchase at retirement

EdInvestor

Purchased life annuity rates are here.

An example of equity release amounts .

A home reversion plan may offer more.Info here, may need to scroll down

dunstonh

annuity rates change daily and I very much doubt that those rates on that site change that frequently. So, use them for simple calculations only but do not rely upon them for accuracy.

jenko

There is a new product coming out soon from a very big company. It is designed to sit between Drawdown (ASP) and Annuities taking the best from both contracts.

It will pay you a guaranteed income for life (the % of which is dependent on your age when you invest and the age you take income), whilst keeping your money invested in the markets up to 85% in equities. If the fund value grows then the income will increase, but never drop when the fund value drops.

The income is even continued once the fund value is exhausted, but if you die before it is exhausted it is returned to the estate.

Due to be launched in Sept

rossbenn

whiteflag wrote:

I disagree- contributing to a pension and retirement options are completely separate issues. Unless you have a pension fund in the first place the choice of annuity etc becomes academic.

I find it hard to believe anyone would question the merits of joining a pension scheme with a 6% employer contribution. What other investment would be capable of outperforming this given the pension will receive an 6% extra per annum in contributions. Plus the fund will grow virtually tax free and the contributions could get tax relief of up to 40%. The funds are top quality and will more than likely benefit from discounted charges.

Why for one second would EdInvestor want to put any doubt in anyones mind as whether to join this scheme. Its a no brainer!

If it is a no brainer, why does Robert Maxwell spring to mind?

Andy_L

Is a Maxwell style embezzlement possible with a money purchase scheme rather than a final salary as everybody has their own individual pot?

Andy

dunstonh

Is a Maxwell style embezzlement possible with a money purchase scheme rather than a final salary as everybody has their own individual pot?

It isnt.

Plus, I seem to recall that the number of people affected by collapsed final salary schemes is around 60,000. Although a horrible position for those 60,000, it makes them a very tiny minority. Plus you have some protection in place now.

whiteflag_3

rossbenn wrote:

If it is a no brainer, why does Robert Maxwell spring to mind?

Why does Robert Maxwell spring to mind? What have money purchase schemes got to do with falling off boats?

Adverts in signatures are prohibited btw!

cheerfulcat

dunstonh wrote:

Plus, I seem to recall that the number of people affected by collapsed final salary schemes is around 60,000. Although a horrible position for those 60,000, it makes them a very tiny minority. Plus you have some protection in place now.

Currently 100,000, and the protection is non-existent; the government has denied all responsibility. Have a look at the open letter from Ros Altmann , former adviser to the Treasury, to the Secretary of State for Work and Pensions and see if you are still so sanguine about pension protection...

dunstonh

100,000 people in the scheme of things is still a very small number and has absolutely no connection with money purchase schemes.

margaretclare

SilverSurfer2 wrote:

I want to lay down guidelines for financial management for my widow and trustees/executors/attornies after my death/incapacity. I have executed a Power of Attorney in case I become incapable of taking decisions.

We have the usual wills leaving the IHT exempt amount to a trust on first death.

Our objectives are to live as comfortably as possible and be generous to our family while we are alive, rather than live as 'poor old pensioners' who preserve their capital in order that our descendants have the maximum inheritance. In an ideal world the estate of the survivor would be just enough to pay for their funeral and our family would remember us as the source of a lot of help at the time they were most in need

WE ARE NOT ASKING FOR COMMENTS ON OUR PHILOSOPHY OR HOW TO INVEST OUR PENSION FUND.

Please comment on my proposals:-
1) Calculate our Net Worth = Liquid assets + market value of equity based assets + Written Down Value, WDV, of cars + a fraction of the value of our Home
2) Find out the annuity (joint survivor, 3% increasing if index linked not offered by anyone) that Net Worth could purchase at current rates.
3) Find out the decrease in net after tax of pensions when I die (Pension Drop).
4) Find out the % of the value of our home that could be released by an Equity Release scheme. This data is needed for item 1.

OK, you're not asking for comments, but here's one - I agree in principle with much that you say. Your wife seems to be happy with *you* managing all this on behalf of both of you. Fine. It wouldn't work for *us* as a couple, because we're both far too independently-minded. We both manage our own money, with the proviso that it's for both of us.

I agree with the principle of helping where it's most needed, rather than making the young people wait in the event of a will, and then squabbling about who got what and whether it was fair etc etc.

Re equity release, we did this 3 years ago and when one of us reached 68, we could release 25%. One of you aged 77, you could release more. Have a look at https://www.ship-ltd.org

Margaret Clare