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When will annuities be better value??
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Gracchus_Babeuf wrote: »If this moronic government had any sense they would allow pension fundholders to invest in property
There are many different ways to invest in property via a pension. Those not doing it need to find someone other than the government to blame.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
I have to say that I have some sympathy with the view of Gracchus.
Time and time again we see people in the know on this board suggesting that with a well managed portfolio of investments that, over time, it should be possible to achieve a reliable 6% - 8% return before tax and this is with all the fees and charges that the small investor must face.
Why then do companies selling annuities offer only 5% - 6% given that they are massive investors with all the economies of scale? They would probably talk about risk but with such massive funds it should be possible to proportionately mitigate risk.
Oh, and of course at the end of the day they get to keep the capital!!
Where do you think the money comes from that funds those people living into their late eighties, nineties, even their hundreds? Of course it's a gamble, but there are enhanced annuities which pay out more money to those with reduced life expectancies, or even smokers.
You can have an annuity guaranteed to pay out for a certain number of years, or guarantee to pay to a spouse after you're gone. Please don't make the assumption that all annuity providers are simply "on the rob." It's an insurance contract, some people will always end up subsidising others. It's the price you pay for a guaranteed lifetime income.0 -
Where do you think the money comes from that funds those people living into their late eighties, nineties, even their hundreds? Of course it's a gamble, but there are enhanced annuities which pay out more money to those with reduced life expectancies, or even smokers.
You can have an annuity guaranteed to pay out for a certain number of years, or guarantee to pay to a spouse after you're gone. Please don't make the assumption that all annuity providers are simply "on the rob." It's an insurance contract, some people will always end up subsidising others. It's the price you pay for a guaranteed lifetime income.
The fact there are options is irrelevant. The truth is that if you give someone £100000 in exchange for £5000 a year one can see that the payment covers 20 years. If the average life expectancy is 20 years then your profit and costs need to be covered by the investment profit.
Now we get into compound here but even at 3% that is a considerable sum. If it is 5 to 7% then it is substantial.
Yes they need to ensure the average age does not move above its estimate but the average age in the UK for men is well below 80 years. 20 years from 65 is more than 5 years beyond that
Remember this is self financing, the punter pays up front. Now I've written it out it looks worse than I had thought.
I think I'll start buying shares in annuity orgs!!!!! Money for old rope.I believe past performance is a good guide to future performance :beer:0 -
Life expectancy at birth is about 78 for males. If you make it to 65 and you're not dead yet, life expectancy is about 83 for men, 85 for women.Yes they need to ensure the average age does not move above its estimate but the average age in the UK for men is well below 80 years. 20 years from 65 is more than 5 years beyond that"Einstein never said most of the things attributed to him" - Mark Twain0 -
I think I'll start buying shares in annuity orgs!!!!! Money for old rope.
I probably wouldn't!
With the end of the compulsion to annuitise at age 75, falling annuity rates, the advent of greater flexibility in the retirement sector (e.g. see flexible drawdown), distrust of financial institutions and less pension saving in the population as a whole, the outlook hardly looks good!0 -
I probably wouldn't!
With the end of the compulsion to annuitise at age 75, falling annuity rates, the advent of greater flexibility in the retirement sector (e.g. see flexible drawdown), distrust of financial institutions and less pension saving in the population as a whole, the outlook hardly looks good!
Very true but it is largely a self financing business. There is minimal financial outlay up front. Not many businesses need such minimal funding.
But moan as I might I can't change it. At least there are now options. Enjoy your weekend :beer:I believe past performance is a good guide to future performance :beer:0 -
I think I'll start buying shares in annuity orgs!!!!! Money for old rope.
It tends to be a pretty competitive market and generating income from the funds requires complex dealing in fixed income investments, much of it in sovereign debt.
I hold some shares in Aviva, and love the yield, but accept that I'm taking on a fair bit of risk to get this.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
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Interesting. I'm going on the ONS stats for 2008-2010 of an 18-year life expectancy for a 65-year-old UK male. Has life expectancy shot up in the last year or so?Actually that's too low. Current expectation of life for a 65yo man is just over 23 years making 88 the average age."Einstein never said most of the things attributed to him" - Mark Twain0 -
Very true but it is largely a self financing business. There is minimal financial outlay up front. Not many businesses need such minimal funding.
But moan as I might I can't change it. At least there are now options. Enjoy your weekend :beer:
I think you need to read a bit more about capital requirements for annuity providers. Particularly the tough solvency 2 rules which will be in shortly.
Part of the reason rates aren't higher is the stringent requirements imposed, rightly or wrongly.
Profitability isn't at fabulous as you make out, neither is it as straightforward as you'd like to believe.0
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