Income drawdown vs annuity purchase at retirement

whiteflag_3

dunstonh wrote:

erm, should we bother?

I dont think anyone is going to have anything nice to say about it.

Looks like we should as it appears we already disagree on a few issues!

dunstonh

Go for it then. I better read up on it before I make any further comments as I am guilty here of doing an Ed and not knowing about the product well enough before I pass judgement

h5djr

I have, over the last couple of days, read all the posts on this thread and I think I am more confused at the advantages/disadvantages of drawdown v annuities that I was before I started.

My wife and I had a meeting today with an IFA who, having visited a week ago to get some basic facts, came back with some illustrations of both drawdowns and annuities. He seems to think that the drawdown option is far better that the annuity option. We are talking about my wife's pension fund. She is 60 in January. His examples were based on a retirement fund from 2 sources of £100k but this was only an estimate that we gave him. The drawdown option gives an annual income of £7250 (Standard Life) and the annuity (Canada Life) of £5765. year. We are now in the process of getting the actual figures from the 2 sources and when we have those we will be in-touch with him again.

Are there any particular questions we should be asking to help us make up our minds.

Many thanks

Dave

dunstonh

The drawdown option does offer some very good features but it is higher risk. Its purely a case of understanding that risk. If the risk is acceptable, then go for it.

Like many threads in this section, we tend to get an unbalanced picture given to begin with, highlighting all the positive points with none of the negatives mentioned. The IFAs and pension specialists here then try to balance the thread pointing out the negatives so you have all the pros and cons. However, it can give the impression that we are against it and some will try and milk that point to their advantage.

If you understand it and are happy with the level of risk then there is no reason not to go with it.

EdInvestor

What are the annual charges you will be paying for the drawdown?

What will the drawdown fund be invested in?

Those are the two basic sets of facts that are required to give a view.

[Deleted User]

I rang pru re obtaining annuity quotes and was given a mighty hard sell on with profits annuities. I only got him off the line by agreeing to him sending wp quotes,( which I will bin).

I think I am going to go for a small annuity with my own sipp. Single life, escalating at 3%, 5 year guarantee, monthly in arrears. Pru gave me a verbal quote of £1412 on a pot of £36835 on a conventional annuity

ok I know shock, horror but at the other end of the pension adventure is the safety net aspect. My own pensions will kick in, in 16 months and I will have steady income from state pension + teachers pension+ annuity (which I could start immediately) = £11500

My husband`s fund will be involved in drawdown but I am thinking of us taking the tax free cash and buying an annuity for him with that, as we won`t be needing the cash for anything major

I think I am being sensible as we will still have a good amount in hyp stocks to fund drawdown

EdInvestor

Suggest you shop around on the annuity front.Have you compared the income available from drawdown with that available from an annuity?

To me it seems an odd decision from a (young) woman who appears not to be risk averse and to have investment experience, and who has decent inflation-protected state supplied income to cover the basics. :huh:

Surprised that you feel the need for extra security at this stage.

My husband`s fund will be involved in drawdown but I am thinking of us taking the tax free cash and buying an annuity for him with that, as we won`t be needing the cash for anything major

Won't you? Are you sure?IMHO leaving yourself with no free capital would be very risky.

[Deleted User]

I haven`t made the decision yet Edinvestor. I have an active mind so I`m always thinking

I am going to be 59 next birthday so am not so young

h5djr

We have shopped around for quotes for an annuity using my wife's pension fund of £100,000 and out of the three we have received so far, the one from our IFA is better than from the two direct annuity organisations. The IFA quote was £5652 and the two direct annuity ones were £5413 and £5419. All are on the same basis - both of us will be 60 next year, Joint life, Level, 10year guarantee, 100% spouse pension, payable monthly in advance. We are still waiting for some more direct annuity organisation quotes to arrive.

Dave R

EdInvestor

kittie wrote:

I am going to be 59 next birthday so am not so young

Only another 30 or 40 years to go then