Income drawdown vs annuity purchase at retirement

Supernova

Gross £18,400 would be good as long as it can be sustained in the face of inflation and charges (and global financial crises).

The partial drawdown looks attractive but what sort of portfolio is appropriate?

For my understanding the only illustration I could find is here (Launch New Business Calculator):

http://www.pruadviser.co.uk/content/57818/354015/phased_income/

All being well the part in drawdown plus the part not crystallised still add up to roughly the original fund amount of £400K if I draw £15K nett income? And both are presumably invested in similar funds? Does that mean it's never really depleted?

The point is to retire from a full-time salaried job and try to generate income in a less secure field, whilst taking care of basic living expenses. I will still have £100K of cash savings and a £170K unmortgaged property as backup.

Mind you Money Week thinks everything is about to collapse anyway:

http://www.fsponline-recommends.co.uk/page.aspx?u=pbd2&tc=LMYKNC26&PromotionID=2147068543&

Cheers!

Supernova

...anyone? :-)

Also, what would be the minimum on the protection side? Life assurance? Critical illness?

Thanks

atush

Your questions (about which funds to invest in and what balance in your portfolio) are really questions for a paid IFA. Try unbiased.co.uk

robert45

Members of defined contribution pensions schemes . can use their accumulated fund after age 55 to purchase an annuity. An annuity is a contract with an insurance company that pays a regular income for the policyholder's lifetime.

Alternatively, the policyholder could start an income drawdown plan also known as a unsecured pension. This allows the policyholder to keep their fund invested and draw, if required, a regular income.
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robert45

hi..... how are you.

robert45

A lifetime annuity (referred here as just an annuity) is a contract between an insurance company and a pension scheme member under which the member hands over all or part of their pension fund to the insurance company which agrees to pay out an income to the scheme member for the remainder of that person's life. The annuity would normally be paid monthly, quarterly, half-yearly or annually.

The amount of the annuity may stay the same throughout the years of payment or may have automatic annual increases built in. These increases may be at a fixed rate, e.g. 3% per year, or the rate of increase may vary, e.g. with the annual change in the Retail Price Index.

Supernova

atush wrote: »

Your questions (about which funds to invest in and what balance in your portfolio) are really questions for a paid IFA. Try unbiased.co.uk

I am in touch with an advisor but won't get an appointment until the New Year. Since I am about to be made redundant I was asking for a sanity check in the meantime about the mechanics of how phased drawdown might work and what type of funds are typically defensive enough but keep pace with inflation (e.g. the HL booklet suggests Income Growth funds as part of it).

Hopefully the advisor will help with the detail but I wanted to have more than just a rough idea in my head of how it works beforehand. I will need to make some decisions about boosting my pot fairly quickly if I'm going to go ahead.

atush

Generally, as you said income funds or income and growth funds. Also high income bond funds and other bonds (but many think the bond market incl govt backed gilts is toppy and due for a correction).

Commercial property funds are also quite often used.

jamesd

The sort of mixture of funds that might be used could include these examples:

Invesco Perpetual High Income
Invesco Perpetual Monthly Income Plus
Invesco Perpetual Distribution

Those happen to be from one place and there are many more that could be used. I'd want to see around ten to fifteen different funds used.

Jack_Griffin

@oceanblue - drawdown seems to need a lot of management, not really feasible for everyone in their late 80's or just ill. Not everyone is as savvy as you.