Pension will pay less a year than husband paid in?

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  • bostonerimus
    bostonerimus Posts: 5,617
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    edited 20 February 2019 at 3:26PM
    all that said an annual income of £3420 from a pot of £75K is approx 4.6%... isn't the rule of thumb to use around 3% as a sustainable draw-down figure?

    I'm assuming that the Scottish Widows Pension is a Defined Benefit or has some annuity component. in which case be careful not to confuse a sensible drawdown rate form a DC pension pot with the payout rate from a DB pension. All things being equal a DB pension should be able to pay a higher annual income than a DC pension because of the mortality credit and the pooling of risk.

    If you have a DC pension you might withdraw an index linked starting 3% or 4% a year and hope to have something left in the pot when you die. For a DB pension you get the longevity insurance, maybe some death benefit, and hopefully a higher drawdown income, but you give up access to your capital.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • AnotherJoe wrote: »
    OP what they are showing him is what he'd get back if he bought an annuity from them, which he shouldn't do.

    Why not?
    (Not disputing, just curious :))
  • My husband has a Scottish widows pension and he’s been looking at the paperwork. He pays in £5752 a year and they say he will receive £3420 taxable income a year on retirement. Given that he’s paid in a total of £75k over the years he would have to live a long time after retirement just to get back what he’s paid in? Can this be right?

    Surely it depends on how many years he has been paying in? The projections change (increase) year on year. He could be paying in for 15 years but then be receiving the pension for 30 years or more. Does that £5752 include employer contributions? Also if they are just quoting annuity rates that does not mean that is the best way of taking it in fact very often it is not.
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  • AnotherJoe
    AnotherJoe Posts: 19,622
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    lisboa84 wrote: »
    Why not?
    (Not disputing, just curious :))

    Perhaps I was a little harsh, they are showing him what a generic annuity taken at an age when many wouldnt take one since the value is poor at that age and also that takes no account of individual,circumstances including location, health, otherfinancial circumstances. In other words, one size doesn't fit all and worse it gives people a false idea of the value of their pension.
  • sandsy
    sandsy Posts: 1,716
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    Too little information to comment.
    How old is your husband?
    What is the assumed retirement age?
    Is the projected income flat or increasing? Single life or with spouse's benefits?

    Have you ever actually thought how much might be required to provide a guaranteed income for life, no matter how long that is?
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