IFA Annuity Commission Fee

jamesd

EdInvestor, why cash instead of preference shares or directly held corporate bonds? Both of those are currently available with yields greater than cash.

tfc, nothing wrong with using accumulation units and selling some once a year. That beats being forced to have investments you don't want because you're constrained to have cash-producing investments. EdInvestor likes income-producing investments as a category and disfavors capital growth producing investments as a category because of EdInvestor's investing preferences.

Annuities are a bet against a short life but also Retired I.F.A. is right about the expectation of lower income from them compared to drawdown. While Retired I.F.A. won't like it some may like the combination of one or more annuities to provide that bet against a long life and provide some low hassle income late in life, while using drawdown for the income above the bare minimum. But since there's an advantage to drawdown and the optimal age for buying an annuity for a typical person is now about 75 years old that annuity purchase can wait if you don't mind ups and downs in the intervening years.

It's not so much risk as not liking the ups and downs of value and needing to manage things that's the issue. It's easy enough to smooth the year by year income using six months of income in a savings account paying a current account by standing order. The ups and down's don't have to directly affect month to month living income.

EdInvestor

jamesd wrote: »

EdInvestor, why cash instead of preference shares or directly held corporate bonds? Both of those are currently available with yields greater than cash.

I'm not against such investments - commercial property ITs are another such which I hold - but holding a chunk of a drawdwon in cash can kill two birds with one stone, as mentioned in your last para. It's also less hassle - IMHO many people with investment experience find it quite easy to keep track of cash interest rates and the stockmarket, but start tacking on the bond market and it can all start to seem a bit too much like hard work. :rolleyes: To my mind the bond market is also not as low risk as many people think.

tfc, nothing wrong with using accumulation units and selling some once a year. That beats being forced to have investments you don't want because you're constrained to have cash-producing investments.

But do realise you are eating into capital if you sell shares to pay income, which isn't the case if you use divis. It's less risky - do you want to be selling shares in a downturn? Extra selling also increases charges. There are some investments worth having which don't on the whole pay divis, eg oil/commodities and small companies funds. These may be worth holding but shouldn't IMHO be part of the core income-producing part of a drawdown, as they are high risk.