# Do annuity rates differ much?



## swee'pea99 (10 Jan 2021)

I have to decide what to do with my pension and I'm basically minded to take the 25% tax-free cash and buy an annuity with the remaining 75%. I'm more than half-minded to just go with my existing provider - Scottish Widows - not least because they tell me something approaching a third of the total value qualifies for a Guaranteed Annuity Rate, which in my case is something like twice their current basic rate. 

The only thing, it seems to me, that could make it make sense to transfer to another provider would be if their rates were really majorly better. (Of the order of one-third better, by what my mate used to call bookie-maths.) Is that likely/possible? Or is it the case that as with savings interest rates, there tends to be some variation between different providers' offers at any given time, but really very little.

Or maybe there's a radical alternative to the 25cash/75annuity scenario that I should be thinking about?

All thoughts welcome.


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## slowmotion (10 Jan 2021)

Go to an online annuity comparison site and see what rates different providers offer. They tend to vary by quite a bit. You will have to choose if you want it inflation-proofed and/or if you want your family to keep the residual sum when you eventually croak. If you have any medical conditions, you really must tell them. You get much better annuity rates if you look like your life expectancy is limited.

I decided against an annuity, BTW. They didn't look like very good value to me.

Edit: @srw knows about this stuff.


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## marzjennings (10 Jan 2021)

I wouldn't touch most annuities with a 10ft barge pole. Hand my hard earned pension pot over to an insurance company that pockets everything if I die early, may go bankrupt at any time, and will charge me excessive fees to get access to my own cash. No chance.


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## Chris S (10 Jan 2021)

An annuity is just the interest on your own money. It's not even guaranteed anymore and you don't get access to the lump sum.


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## shep (10 Jan 2021)

I would seriously consider draw down, fella I know recently looked into this.

His pot was 200k with Standard life and the Annuity they offered was 7k per year once he'd taken his 25%.

He's 58 so decided to have his lump and draw 18k per year until he's 67 (state pension age) then reduce his draw down by the 8k he'll get from the state so retaining the same yearly amount.

I think he's worked out it'll last him until mid 70's before it's gone, plus he's got the 50k to dip into for hols etc.

His missus has a decent company pension as well so it's not just his money they depend on.

I realise his remaining pot is subject to fluctuations in the stock market but he felt this was better than living on 7k per year.

Another thing with draw down is if he snuffs it Tomorrow his missus will get the lot whereas an annuity doesn't always pay out the the spouse.


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## gbb (10 Jan 2021)

Drawdown seems to be an increasingly popular option, take 25 % and the remainder stays invested / or maybe gets reinvested. 
I know one former colleague who took cash plus an annuity and the annuity was virtually worthless, she either made a poor uninformed decision or was badly advised.
Another colleague looked at doing the same and it just didnt make financial sense for him.
I dont know of course how much was in their pots, it may not have been much for all I know.


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## Gunk (10 Jan 2021)

shep said:


> I would seriously consider draw down



Most are doing this now, plus you can reinvest your pension pot so it keeps growing


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## Rusty Nails (10 Jan 2021)

Am I correct in believing that 75% of the draw down amount is taxable as it is classed as income?

If so you would need to consider how much tax you would pay on it, especially if it pushed your income that year into a higher tax bracket.

I have about 50k in a couple of small private pension schemes and am thinking of draw down once I have done the maths.


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## swee'pea99 (10 Jan 2021)

slowmotion said:


> Go to an online annuity comparison site and see what rates different providers offer. The tend to vary by quite a bit. You will have to choose if you want it inflation-proofed and/or if you want your family to keep the residual sum when you eventually croak. If you have any medical conditions, you really must tell them. You get much better annuity rates if you look like your life expectancy is limited.
> 
> I decided against an annuity, BTW. They didn't look like very good value to me.
> 
> Edit: @srw knows about this stuff.


Thanks, that's very helpful. Could I ask what you decided on rather than an annuity?

I have been told by Scottish Widows that 'Partial benefits are not permitted. All benefits must be settled at the same time', and 'Drawdown is not available from this type of policy, however the value of the plan may be transferred to another policy type that does', the downside being that if I wanted to do this and take 25% as cash, the cash would come mostly or entirely from the part of the plan that carries the guaranteed annuity rate, so I'd lose that benefit.


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## slowmotion (10 Jan 2021)

swee'pea99 said:


> Thanks, that's very helpful. Could I ask what you decided on rather than an annuity?




My private pension scheme has been with Standard Life. About a year ago, I had the choice of taking an annuity or any of the other options so I started half-heartedly looking into the matter. I was in the very fortunate position of not actually needing the pension income so I didn't rush into it. After seeing what the annuity rates were, I decided against that option and went to see a couple of investment people. They came up with some investment schemes......and then I found out their annual management fees, between 2 and 2.5% p.a. at which point I fled in horror. At the moment, my fund is still sitting with Standard Life and they are continuing to invest it but I'm not taking any income from it or making any further contributions. It's growing but not spectacularly. I suppose I'm dodging the issue at the moment. Sorry, I can't give more helpful advice. Good luck.


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## ianrauk (10 Jan 2021)

Check out Pensionwise. Its a free independent pension information service that will help you with your options.


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## cisamcgu (10 Jan 2021)

@swee'pea99 

Ask your quesion HERE. it is full of knowledgeable people who are happy to answer questions such as these


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## Notafettler (10 Jan 2021)

Tell them you smoked since you were 16 and you gave it up last week.


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## Notafettler (10 Jan 2021)

marzjennings said:


> I wouldn't touch most annuities with a 10ft barge pole. Hand my hard earned pension pot over to an insurance company that pockets everything if I die early, may go bankrupt at any time, and will charge me excessive fees to get access to my own cash. No chance.


You live in the US, don't talk about UK like you have some knowledge of it.
As a starter pensions are protected by the government.
Prudential regulators authority set the rules for reserves etc.
You can also leave money to family but obviously
obviously you get less.
Its quite astonishing that you can't grasp that annuities are based on average life expectancies. If you die early can't you grasp that some will die later and that maybe you.
if you take out life insurance which finishes when you are 65 do you think you should get your money back?

Feel free to talk about the US not the UK.


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## swee'pea99 (10 Jan 2021)

ianrauk said:


> Check out Pensionwise. Its a free independent pension information service that will help you with your options.


Thanks. I did actually try them a while back, but the man I spoke to seemed keen to 'take me through the script' rather than offer advice based on my situation. I may try them again now that I'm at least slightly better informed. 


cisamcgu said:


> @swee'pea99
> 
> Ask your quesion HERE. it is full of knowledgeable people who are happy to answer questions such as these


Thanks. That does look good. I'll give them a go.


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## Notafettler (10 Jan 2021)

Chris S said:


> An annuity is just the interest on your own money. It's not even guaranteed anymore and you don't get access to the lump sum.


Its an annuity. Guaranteed payment for the rest of your life. It is not interst on your money. There is also an element of your capital back. Of course you don't get access to the lump sum, you have used to buy the annuity. If you think its just interest then keep it and put in a savings account.


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## Notafettler (10 Jan 2021)

swee'pea99 said:


> Thanks. I did actually try them a while back, but the man I spoke to seemed keen to 'take me through the script' rather than offer advice based on my situation. I may try them again now that I'm at least slightly better informed.


Alas the script is required. I think when getting an equity release i had to have 3 conversation each lasted nearly an hour.
"Are you sure downsizing wouldn't be a better idea "
"You may loose benefits if you take out an equity release"
They suggested otherways to get money. On and on they went trying to get me not to take out an equity release.
And then when I said I wanted buy shares with the money shares they said THEY would not allow that!
Unreal, I could give it away to my children, use it to buy a car, use it to go on holiday but not to buy shares to increase my income?
Had to ring another broker and lie. I haven't told my daughters that I am supposed to be giving them £15,000 each. No chance.


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## mikeIow (10 Jan 2021)

Pension wise are now *allowed* to give advice! 
They will only explain things, & outline options available.
I would agree that annuity rates are very poor...although I suspect as you approach 75 and/or have health issues that might lower life expectancy, they may be more appealing.

Not sure what @Chris S means - the whole point of annuities is that they very much *are* guaranted!

But yes, MSE has a lively pension forum with some helpful posters.


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## MntnMan62 (11 Jan 2021)

marzjennings said:


> I wouldn't touch most annuities with a 10ft barge pole. Hand my hard earned pension pot over to an insurance company that pockets everything if I die early, may go bankrupt at any time, and will charge me excessive fees to get access to my own cash. No chance.



Not to mention paying you a rate of return on your money that is paltry compared to what you could earn in the market from a nicely diversified portfolio. And forfeiting the entire balance when you die means your children, if you have any, get nothing. No inheritence or legacy from their parents. I spent 30 years working in wealth management (real estate) and the investement advisors always advised against annuities for exactly these reasons. In fact, I never once ever heard them recommend an annuity to meet a clients financial goals.


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## slowmotion (11 Jan 2021)

MntnMan62 said:


> Not to mention paying you a rate of return on your money that is paltry compared to what you could earn in the market from a nicely diversified portfolio. And forfeiting the entire balance when you die means your children, if you have any, get nothing. No inheritence or legacy from their parents. I spent 30 years working in wealty management (real estate) and the investement advisors always advised against annuities for exactly these reasons. In fact, I never once ever heard them recommend an annuity to meet a clients financial goals.


In the UK, you can opt to have your annuity guarded against inflation and/or allow the un-spent sum passed to your family when you croak. To choose both is the option that gives you the smallest annuity, about 50% of the one that is not inflation-proof and your family get nothing. Even the most generous annuity (in my case) gave a pitiful return of less than 3% on my initial lump sum. Over the long term, the stock market yields about double that, and you still have your initial investment.


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## cisamcgu (11 Jan 2021)

Although the majority of posters are correct and annuities are not good value at all in this low interest rate/quantative easing world we live in, for some people they are still a valid choice because of the *guarentee *that they provide. Do you still want to be managing a portfolio when you are 85 ?

But yes, currently, better to leave the money in drawdown in my opinion, but better than my opinion you should GET ADVICE from someone who knows these things, not anonymous people on the internet or a mate down the pub (if we still went to pubs  ). Only use those people to help you form the questions that need to be asked to professionals!


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## mistyoptic (11 Jan 2021)

cisamcgu said:


> you should GET ADVICE from someone who knows these things, not anonymous people on the internet or a mate down the pub (if we still went to pubs  ). Only use those people to help you form the questions that need to be asked to professionals!


THIS!


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## marzjennings (11 Jan 2021)

Notafettler said:


> You live in the US, don't talk about UK like you have some knowledge of it.
> As a starter pensions are protected by the government.
> Prudential regulators authority set the rules for reserves etc.
> You can also leave money to family but obviously
> ...



Born in the UK, spent most of my life in the UK, planning to probably retire back home, in the UK. And annuities are mostly crap both sides of the pond. 

I can grasp how averages benefit those selling annuities, but don't really help the individual.


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## Chris S (11 Jan 2021)

Notafettler said:


> Its an annuity. Guaranteed payment for the rest of your life. It is not interst on your money. There is also an element of your capital back. Of course you don't get access to the lump sum, you have used to buy the annuity. If you think its just interest then keep it and put in a savings account.


The amount is not guaranteed, it could be less than the current interest rates and often is. You give the pension company the shirt off your back and they give you back the buttons, if you're lucky.


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## MntnMan62 (11 Jan 2021)

Notafettler said:


> Its an annuity. Guaranteed payment for the rest of your life. It is not interst on your money. There is also an element of your capital back. Of course you don't get access to the lump sum, you have used to buy the annuity. If you think its just interest then keep it and put in a savings account.




While you are correct that annuities are based upon life expectancy, they are also based upon current interest rates at the time the annuity is set. And that is very much "interest on your money". Or more accurately, "return on your investment". Sure, it's guaranteed in the UK. But you are paying for that guarantee. It's just not as obvious. Using the term interest is misleading because it suggests that there is not "investment return" factored into the annuity. But it's not all that misleading because when people say "interest" they are alluding the fact that an annuity is a FIXED return based upon interest rates for the life of the annuity, not matter what happens to the markets during the life of the annuity. In a high interest rate environment, the payout would be higher. In the present low interest rate environment payouts will be lower. That alone is not a reason to accept or reject annuities. However, given that interest rates are not just low but at historically low levels, it is prudent to question their expediency at the present time.


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## Notafettler (12 Jan 2021)

MntnMan62 said:


> based upon current interest rates at the time the annuity is set.


Not strictly correct. The rate is set by the investments made at the point of purchase. Those investment are required to be low risk government bonds, company bonds (very good credit risk) etc. Nowadays infrastructure purchases by the insurance company (low risk) and in the case of legal and general the returns on social housing (which are also considered low risk). The last 2 are not affected by interest rates. Bonds by contrast are. The bonds which previously existed will fetch a higher price when bought if interest rates have gone down and vice versa. Hence the return will fall/rise and there would be fall/rise in the price at redemption.
Bonds are proving a problem for the insurance companies as people live longer than the bonds last. So the replacement bonds may not match the returns on the original bonds. 
Infrastructure and housing rent will at least keep up with inflation. As will interest rates....in normal markets!!


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## Notafettler (12 Jan 2021)

Chris S said:


> The amount is not guaranteed, it could be less than the current interest rates and often is. You give the pension company the shirt off your back and they give you back the buttons, if you're lucky.


The amount you receive is guaranteed for life. The amount you receive will always be greater than savings rates.
See above and stop embarrassing yourself. As an aside why don't you stick it in a bank account. After paying all the tax. Or stick it in a sipp and invest yourself. "This is not advise stockmarket go down as well as up". i mean the latter seriously. If you can't work out how annuity works then investing in the stockmarket is not for you.


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## Notafettler (12 Jan 2021)

marzjennings said:


> I can grasp how averages benefit those selling annuities, but don't really help


Annuities are an insurance policy. Like house insurance, car insurance etc some gain some loose. Average is the average person. Some will gain some will loose. It ain't that hard.


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## Notafettler (12 Jan 2021)

cisamcgu said:


> Although the majority of posters are correct and annuities are not good value at all in this low interest rate/quantative easing world we live in, for some people they are still a valid choice because of the *guarentee *that they provide. Do you still want to be managing a portfolio when you are 85 ?
> 
> But yes, currently, better to leave the money in drawdown in my opinion, but better than my opinion you should GET ADVICE from someone who knows these things, not anonymous people on the internet or a mate down the pub (if we still went to pubs  ). Only use those people to help you form the questions that need to be asked to professionals!


Drawdown would be my option as it would limit my tax charges (if any) BUT I would consider putting some in a annuity as at least some guarantee of income. In particular your statement about managing investment at 85. As I manage all my own investments in a sipp I may consider it. My memory is crap as it is. Thank you for your advise!!


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## Notafettler (12 Jan 2021)

MntnMan62 said:


> Not to mention paying you a rate of return on your money that is paltry compared to what you could earn in the market from a nicely diversified portfolio. And forfeiting the entire balance when you die means your children, if you have any, get nothing. No inheritence or legacy from their parents. I spent 30 years working in wealth management (real estate) and the investement advisors always advised against annuities for exactly these reasons. In fact, I never once ever heard them recommend an annuity to meet a clients financial goals.


Markets go up markets go down including nicely diversified portfolios. Unlike annuities. Annuity investments made by insurance companies are required to be low risk hence low returns. Blame the PRA for that not the insurance companies. 
Your children get the house. Unless you take out an equity release!!. Your children are not entitled to anything its your money. 
A couple of neighbours mentioned just how much their nicely diversified portfolio went down during the crash both had investment advisors they weren't doing there own investments.
Japanese stock markets are lower now than they were 20 years ago (good time to buy? Not advise!!)


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## Chris S (12 Jan 2021)

Notafettler said:


> The amount you receive is guaranteed for life.


Only with a fixed annuity. And they will get eaten away by inflation.


Notafettler said:


> The amount you receive will always be greater than savings rates.


That's not true.


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## Notafettler (12 Jan 2021)

Chris S said:


> That's not true.


I can assume from this you are going to put it in a savings account, which according to you pays more, which one?
You have already shown how much your lack of knowledge you have of annuities, don't make it worse.
As an aside are you still denying that annuities aren't a guaranteed payment for life?


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## MntnMan62 (12 Jan 2021)

Notafettler said:


> Not strictly correct. The rate is set by the investments made at the point of purchase. Those investment are required to be low risk government bonds, company bonds (very good credit risk) etc. Nowadays infrastructure purchases by the insurance company (low risk) and in the case of legal and general the returns on social housing (which are also considered low risk). The last 2 are not affected by interest rates. Bonds by contrast are. The bonds which previously existed will fetch a higher price when bought if interest rates have gone down and vice versa. Hence the return will fall/rise and there would be fall/rise in the price at redemption.
> Bonds are proving a problem for the insurance companies as people live longer than the bonds last. So the replacement bonds may not match the returns on the original bonds.
> Infrastructure and housing rent will at least keep up with inflation. As will interest rates....in normal markets!!



I understand how markets work. Of course they go up and down. Duh. And I understand how different investements work and why. You don't need to explain to me the basics of how and why bond values can fluxuate. I've worked in wealth management advising clients for over 30 years. And, how is the the point of purchase different from the date the annuity is set? When you buy an annuity the rate is set at the time it is purchased. You just repeated what I said. Annuities aren't low risk because someone like the government is dictating they be low risk. They are low risk because of the nature of the investment. By their very nature where you are guaranteed a specific payout for the life of the annuity, that is what makes it low risk. No other reason. And your focus on bonds as the investments which are supposed to back up the annuities is also incorrect. Insurance companies invest in lots of things to support the annuities they underwrite. Not just bonds. They lend money to home buyers and commercial property buyers. They buy and trade stocks. And yes, they buy bonds. People living "longer than bonds last" has nothing to do with annuities. Annuities are purely based upon two things. Interest rates at the time they are purchases/rates set, and the life expectancy of the person purchasing the annuity using actuarial tables. That's it. Reading your post, I don't quite get the point you are trying to make.


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## Chris S (12 Jan 2021)

Notafettler said:


> You have already shown how much your lack of knowledge you have of annuities, don't make it worse.
> As an aside are you still denying that annuities aren't a guaranteed payment for life?



Er, no.


Notafettler said:


> The amount you receive is guaranteed for life.





Chris S said:


> Only with a fixed annuity. And they will get eaten away by inflation.


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## Notafettler (12 Jan 2021)

MntnMan62 said:


> I understand how markets work. Of course they go up and down. Duh. And I understand how different investements work and why. You don't need to explain to me the basics of how and why bond values can fluxuate. I've worked in wealth management advising clients for over 30 years. And, how is the the point of purchase different from the date the annuity is set? When you buy an annuity the rate is set at the time it is purchased. You just repeated what I said. Annuities aren't low risk because someone like the government is dictating they be low risk. They are low risk because of the nature of the investment. By their very nature where you are guaranteed a specific payout for the life of the annuity, that is what makes it low risk. No other reason. And your focus on bonds as the investments which are supposed to back up the annuities is also incorrect. Insurance companies invest in lots of things to support the annuities they underwrite. Not just bonds. They lend money to home buyers and commercial property buyers. They buy and trade stocks. And yes, they buy bonds. People living "longer than bonds last" has nothing to do with annuities. Annuities are purely based upon two things. Interest rates at the time they are purchases/rates set, and the life expectancy of the person purchasing the annuity using actuarial tables. That's it. Reading your post, I don't quite get the point you are trying to make.


I don't quite get your point either I never said purely bonds. The government (PRA) does expect them to be low risk.


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## MntnMan62 (12 Jan 2021)

Notafettler said:


> I can assume from this you are going to put it in a savings account, which according to you pays more, which one?
> You have already shown how much your lack of knowledge you have of annuities, don't make it worse.
> As an aside are you still denying that annuities aren't a guaranteed payment for life?



Why are you assuming he would put the money in a savings account? Making assumptions is always going to ruin any argument you make.


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## Once a Wheeler (12 Jan 2021)

Thoroughly recommend this chap:
https://www.williamburrows.com/
I consulted him, had a useful meaningful conversation, was not pressured into anything, and felt supported in making my own decision rather than pressured into following someone else's advice.


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## swee'pea99 (12 Jan 2021)

Ok, so...first off, thanks for the help thus far - I know a lot more than before I posted. A low bar, admittedly, but still...

I'm now leaning much more toward this drawdown business - not just for the possibly better returns, the flexibility also sounds good for my situation. As I understand it, they basically put my pension pot (say £100k) into an investment fund, which is invested in the stock market. I can then take out (pretty much - and putting tax to one side for the mo) what I want, when I want - but it comes out of that investment fund. So if I take out £10k, I have £90k left in my fund. _Except that_ the fund will have been invested in the meantime. It may have grown to £110k - so I get my £10k out, but I still have a fund worth £100k. By the same token, it may have performed badly, falling by 10%, so between that & the £10k I took out, I now have a fund worth only £80k. And so on. With the significant difference vs annuities that when I croak, any value left in my fund goes to my missus, not the company that issued my annuity. Right so far?

Assuming so, would I be right in thinking that in deciding which drawdown plan to buy, I have to think about two factors: the management charges (in the case of my current provider, 0.3%), and the likely investment performance of the underlying fund? And is that where an IFA comes in? Applying his/her knowledge of the market to select (or at least recommend) the drawdown plan that best reflects my appetite for risk vs reward?

Thanks in anticipation for any explanations. BTW, I will also be browsing the MSE forums, as advised; but I do find that as with car mechanics or DIY, I often get replies better pitched to my understanding hereabouts than those from more expert experts on more specialised forums, which I often find baffling/complex. CC people speak my language!


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## sheddy (12 Jan 2021)

Has anyone taken a fixed term annuity - reinvest the balance after 5, 10 or more years ?
https://www.moneyadviceservice.org.uk/en/articles/fixed-term-annuities


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## Notafettler (12 Jan 2021)

MntnMan62 said:


> Why are you assuming he would put the money in a savings account? Making assumptions is always going to ruin any argument you make.


It was a question posed as a question. He is saying what a rip off they are when they are not. He is also not coming with alternatives. I am fond of alternatives


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## Notafettler (12 Jan 2021)

No, looks like an interesting option. I will note it down for future reference


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## Brads (12 Jan 2021)

Annuity has to be the worst value ever. I can't think of any reason to go that route nowadays.

Well invested SIPP drawdown is by far a better option.

Vanguard have a drawdown option now, fee is capped at £375 or something.

I have mine with Intelligent Money, full financial service (private client manager) but no requirement for an IFA or their money for nothing fees.

IM's fees are really good and come down for funds over a million. They have a minimum investment of 100k but I have a code to get round that when setting up a fund.

Well managed funds will make you a very good return. And if you keep in mind that it's an investment, not trading, and actually leave it alone, then market movement will not have a huge affect over the years.


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## mikeIow (12 Jan 2021)

Another vote for Intelligent Money: visit Pistonheads finance sub-forum & have a browse of the sticky thread at the top....perhaps skim the first couple of pages and perhaps the latest one or two. A decent bunch of people there.

Also perhaps visit the MoneySavingExpert retirement sub-forum: a fair few knowledgable folk there too.

Certainly there is the option to use an IFA. Note, they don’t magically make funds ‘grow faster’ than you could yourself - steer clear if they claim that! They will likely take anything from about 0.5%-upwards to manage your finances for you. That will be in addition to any fund/platform fees.


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## slowmotion (12 Jan 2021)

I looked into annuities for my private pension pot 18 months ago. Here were the numbers......

I have a lump sum of £X:

Option A. I give all of £X to the annuity people, there is no increase for inflation, and my family (or my exotic mistresses) get nothing when I croak. The annuity people trouser the lot.

Option B. All of the above but the payments to me, while alive, increase by 3% per year.

Option C. The payments are increased by 3% pa per year and my family (and Fifi Trixibelle and her friends) get to fight over the residue of my initial lump sum.

Here is what I would get per year....
Option A: 2.9% of X
Option B: 2.0% of X
Option C: 1.6% of X

If that isn't a sh*tty deal, I don't know what is. The only thing that an annuity will bring you is certainty. It looks like the wrong sort to me.


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## MntnMan62 (13 Jan 2021)

Notafettler said:


> I don't quite get your point either I never said purely bonds. The government (PRA) does expect them to be low risk.


Then why would you go on and on about how the problem for insurance companies is that people are outliving the bonds, in a discussion about annuities?


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## MntnMan62 (13 Jan 2021)

Notafettler said:


> It was a question posed as a question. He is saying what a rip off they are when they are not. He is also not coming with alternatives. I am fond of alternatives



Annuities are "generally" regarded as less than sound investments. Sure, there may be some people they are suited for. But I think the other poster was making the point that when considering investment options annuities fall at the bottom of the list. And I happen to agree. Annuities cut you off from your accumulated pot of assets. By converting a sizeable pool of investment dollars into a cash flow, you lose the abiity to draw on that accumulated pot of assets and are now left with relying upon a cash flow. And the return on investment is as I have already said, paltry. But hey. Annuities might be the right thing for you. You don't have to listen to us. Go buy yourself an annuity. It's your money after all.


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## mikeIow (13 Jan 2021)

slowmotion said:


> I looked into annuities for my private pension pot 18 months ago. Here were the numbers......
> 
> I have a lump sum of £X:
> 
> ...


But, but, those derisory payments are at least *certain* 

I’ve not done full investigation like you, but that doesn’t surprise me. Gone are the days of expecting 6%.

I do wonder if they are worthwhile revisiting at the age of 75. Age and being closer to *ahem* checking out out to make those numbers more attractive. Even converting a small portion to guarantee some fixed income to cover the basic needs into the dotage. Maybe.
I actively enjoy managing my DC pot now, but I wonder if I will in my 80s


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## MntnMan62 (13 Jan 2021)

mikeIow said:


> But, but, those derisory payments are at least *certain*
> 
> I’ve not done full investigation like you, but that doesn’t surprise me. Gone are the days of expecting 6%.
> 
> ...



Even with rates as low as they are, annuities are just as unattractive as they always have been. Like I've said before, they do make sense for some people. But for many, or even most, they don't. When you are in your 80's and no longer want to manage your money you can either hire a money manager or give it to your kids and have them manage it for you and pay your bills. If no kids, well, then maybe the annuity might make sense. But they are a bad investment when you compare your earnings from them against most alternatives. Before I was able to work for a bank in their wealth management group, I started out working for a life insurance company. They always told us to push the whole life and universal life policies that had an investment increment to it. But again, when you compare the historic returns against most if not all alternatives, there are much better options than life insurance or annuities. I didn't stick with the insurance company for very long. Less than a year.


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## ianrauk (13 Jan 2021)

@swee'pea99 
Which Magazine drawdown calculator *HERE*


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## mikeIow (13 Jan 2021)

ianrauk said:


> @swee'pea99
> Which Magazine drawdown calculator *HERE*


Quite a good 'quick calculator'!

There is a nice google docs spreadsheet someone made here - you can copy and edit for yourself.

As someone mere months from stepping away from the day job, and also someone who loves a bit of excel, I have one that tries to work things out - happy to share a 'sanitised' version - this kind of thing:





if interested just message me. ONLY if you are comfortable with spreadsheets, but nothing is hidden, all visible!

cheers


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## swee'pea99 (13 Jan 2021)

ianrauk said:


> @swee'pea99
> Which Magazine drawdown calculator *HERE*


Thanks for that. One thing it's reiterated for me is how atypical my situation is - and it and @mikelow's spreadsheet have also highlighted just why I do need to talk to an IFA about all this. I just glaze over at this kind of thing, which is the kind of thing you really can't avoid if you're to make good decisions. (I 'liked' mikelow's post because the thought was kind. I don't actually like it at all. )


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## Brads (14 Jan 2021)

https://www.tidewaywealth.co.uk/p/151/drawdown-calculator

This one is great as well.

I'll second the pistonheads thread, even though I'm now banned for life I contributed to it a bit and am on friendly terms with Julian the owner.

Can't recommend them highly enough.


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## mikeIow (14 Jan 2021)

Brads said:


> https://www.tidewaywealth.co.uk/p/151/drawdown-calculator
> 
> This one is great as well.
> 
> ...


Banned for life?
Are you President Trump?


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## Brads (14 Jan 2021)

lol Nope

Had a couple of bans as there are one or two mods on there with real issues.
I reacted to a provocation and got a life ban in return.

Hoping for a return though lol I have friends in high places lol unlike Trump.


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## SpokeyDokey (14 Jan 2021)

mikeIow said:


> Quite a good 'quick calculator'!
> 
> There is a nice google docs spreadsheet someone made here - you can copy and edit for yourself.
> 
> ...



Good stuff!

We built our own some years ago - effectively a 25 year cash flow forecast it gave us a lot of reassurance some years back prior to switching off a pretty high net annual income.

One of the surprising things for us was how little we needed to live on (relatively speaking) once you have no mortgage, credit cards and aren't paying for v.expensive cars, holidays, watches etc. 

We also reconcile our cash/investment position every month as a matter of course, doesn't take long once the Excels are set up. After a while it just becomes part of your life routine.


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## Brads (14 Jan 2021)

A reoccurring theme among the workmates I know who have retired is how little money you actually need every month.


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## mikeIow (14 Jan 2021)

SpokeyDokey said:


> Good stuff!
> 
> We built our own some years ago - effectively a 25 year cash flow forecast it gave us a lot of reassurance some years back prior to switching off a pretty high net annual income.
> 
> ...



Not sure we will ever get rid of the credit cards: if anything, COVID has taught me that cards are king.....but perhaps the number on them will come down a bit! Started to use Monzo as a “entertainment card” to track that....not that it got much use this past year. Made it a personal duty to keep the local pub and another local small brewery going with regular purchases...a sacrifice worth making🍻

I’ve been reconciling things with Quicken 2000 for 2 decades (& versions prior to that!). I’m quite sad like that 
Still looking for a nice replacement (since I have it running in a Windows 7 virtual machine ). Old dog...looking for a new trick, but the old one just works....



Brads said:


> A reoccurring theme among the workmates I know who have retired is how little money you actually need every month.


Same I’ve heard, from a few good friends (former workmates) who have retired over the past 1-10 years.
Quite encouraging really


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## slowmotion (15 Jan 2021)

mikeIow said:


> Not sure we will ever get rid of the credit cards: if anything, COVID has taught me that cards are king.....but perhaps the number on them will come down a bit! Started to use Monzo as a “entertainment card” to track that....not that it got much use this past year. Made it a personal duty to keep the local pub and another local small brewery going with regular purchases...a sacrifice worth making🍻
> 
> I’ve been reconciling things with Quicken 2000 for 2 decades (& versions prior to that!). I’m quite sad like that
> Still looking for a nice replacement (since I have it running in a Windows 7 virtual machine ). Old dog...looking for a new trick, but the old one just works....
> ...





Brads said:


> A reoccurring theme among the workmates I know who have retired is how little money you actually need every month.


The lockdowns have helped that enormously. Yes, there's Amazon and all the rest, but the opportunities and temptations to spend have shrunk quite a bit in the last ten months.


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## mistyoptic (15 Jan 2021)

mikeIow said:


> I’ve been reconciling things with Quicken 2000 for 2 decades (& versions prior to that!). I’m quite sad like that
> Still looking for a nice replacement (since I have it running in a Windows 7 virtual machine ). Old dog...looking for a new trick, but the old one just works....


don’t know if it’s still possible but, certainly until a few years ago, as a Quicken 2000 user you could download Quicken 2004 free from the website and I’m managing to run it on a W10 64bit machine quite happily


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## ianrauk (15 Jan 2021)

mistyoptic said:


> don’t know if it’s still possible but, certainly until a few years ago, as a Quicken 2000 user you could download Quicken 2004 free from the website and I’m managing to run it on a W10 64bit machine quite happily




Im still using Quicken 98 and W10 machines.
Will have to get round to updating it someday


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## steveinnorthants (15 Jan 2021)

I retired early at 55 about 18 months ago, and went down the drawdown route as it gives my family the security of the fund being part of my estate. The advice I received at the time was to disregard annuities for all the reasons stated above.

I was fortunate to have 2 reasonable pension pots, having split my career over just 2 financial services firms, spending a similar time with each. I could therefore keep one pension intact and receive the usual index linked monthly pension, and transfer the other to a drawdown fund. Fortunately the provider was giving favourable transfer multiples and, despite Covid, the fund value has far outperformed forecasts. I haven't had to draw down yet as the plan is to utilise other savings before doing so, given low interest rates.

You do need to get advice to do such a transfer, but the costs are deducted from the fund, and for me, it was certainly worth it.


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## SpokeyDokey (15 Jan 2021)

mikeIow said:


> Not sure we will ever get rid of the credit cards: if anything, COVID has taught me that cards are king.....but perhaps the number on them will come down a bit! Started to use Monzo as a “entertainment card” to track that....not that it got much use this past year. Made it a personal duty to keep the local pub and another local small brewery going with regular purchases...a sacrifice worth making🍻
> 
> I’ve been reconciling things with Quicken 2000 for 2 decades (& versions prior to that!). I’m quite sad like that
> Still looking for a nice replacement (since I have it running in a Windows 7 virtual machine ). Old dog...looking for a new trick, but the old one just works....
> ...



It's a rare occasion for me to bump into someone who tracks their money on this scale.

TBH I got the idea from someone else back in the 90's - a friend of mine had a really expert grasp of his financial position and I asked him to share the secret. You know what the answer was.

Ironically, in the various businesses I have been involved in over my career they all hinged around financial data which I loved immersing myself in. But being dopey I'd never thought to translate the principles into my personal life. 

The big catalyst was shutting down our corporate careers and transitioning into a much more chilled lifestyle in the early 2000's. To make the 'jump' we needed the analysis to preserve our sanity! Fortunately, and surprisingly, the numbers were kinder than we imagined. The only blot on the landscape has been the drop in interest rates although it has had no real world impact on us as our forecast basically shows a decent positive cash flow ad-infinitum. Our investment income is down by around £30k pa on our 'day 1' projection due to the state of play in the wider economy these days. Cest la vie - we are hardly destitute.

***

One thing I will mention to other posters on this thread is that people, sadly, die.

One of the principles we applied when forecasting was a number of obvious miserable scenarios - again these work out fine for us. Being 7 years older than my wife I was paranoid about leaving her destitute tbh and the forecasting basically negated this paranoia!

On the same theme, unless someone is hell bent on leaving a fortune to their kids, and this may not be an option for some people anyway - there is absolutely no point dying (or the last person in a couple dying) with a whole heap of money in your estate. That's a tricky judgement call of course but it's worth bearing in mind.


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## NorthernSky (15 Jan 2021)

i've only recently started looking into my pension. i was overly confused by it all so just left everything at default
glad to say i've investigated it and have a grasp on what's happening now (more or less 😊)
the annuity forecasts are absolutely dire, it's likely i'll look at drawdown.
i'm upping my contributions in the hope i can get a decent pot going. i've around 20years left to pay into it
i'm reading you would need about £150k - £180k pot to retire comfortably. i'm a good way off that yet


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## steveinnorthants (15 Jan 2021)

NorthernSky said:


> i'm upping my contributions in the hope i can get a decent pot going. i've around 20years left to pay into it i'm reading you would need about £150k - £180k pot to retire comfortably. i'm a good way off that yet



Despite having worked in banking and finance all my life, it is a scary decision to make over retirement, especially if you do so early. To go from having a comfortable monthly income, and savings to fall back on (added to from time to time), to a scenario where monthly income falls significantly, although you maybe have a lump sum invested to draw down, requires a change in mind set. 

I did all the calculations/forecasts etc predicting what we would need to draw and spend and was at first hesitant about using capital which will not be replaced. However, in a short space of time I adjusted and now feel as comfortable as I was when earning. The state pension will also change things positively when that is eventually payable. It is true that most spend less in retirement - well we do anyway, especially with no mortgage.

It is a little disheartening forecasting how long your pot will last and what you will actually need in your 80s and beyond and makes you think more about mortality, but perversely it might encourage you to spend more as some good advice I heard, was to make sure you have spent it all by the time you die. My kids won't be relying on an inheritance, all are already established in jobs and homes, and they will have our house anyway when we both go.


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## Alien8 (16 Jan 2021)

mikeIow said:


> I’ve been reconciling things with Quicken 2000 for 2 decades (& versions prior to that!). I’m quite sad like that
> 
> Still looking for a nice replacement (since I have it running in a Windows 7 virtual machine ). Old dog...looking for a new trick, but the old one just works....





mistyoptic said:


> don’t know if it’s still possible but, certainly until a few years ago, as a Quicken 2000 user you could download Quicken 2004 free from the website and I’m managing to run it on a W10 64bit machine quite happily





ianrauk said:


> Im still using Quicken 98 and W10 machines.
> 
> Will have to get round to updating it someday



I started with Quicken back in the mid-90s on what I guess would have been Win3.1.

I remember that I had to buy a co-pro for my 386 machine so that it would run.

I finally gave up with it when moving to Win10.

Nowadays I use HomeBank which, for a freebie, I quite like.


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## mikeIow (16 Jan 2021)

Alien8 said:


> I started with Quicken back in the mid-90s on what I guess would have been Win3.1.
> 
> I remember that I had to buy a co-pro for my 386 machine so that it would run.
> 
> ...



Yes, I used earlier Quicken versions too! Shame they killed it. I did pop 2004 on at one point, but there was some issue & I went back to 2000.
HomeBank is interesting, although the Mac install looks mildly tortuous - not a simple .dmg package. Might look at it later: thanks for the pointer


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## swee'pea99 (16 Jan 2021)

steveinnorthants said:


> I retired early at 55 about 18 months ago, and went down the drawdown route as it gives my family the security of the fund being part of my estate. The advice I received at the time was to disregard annuities for all the reasons stated above.
> 
> I was fortunate to have 2 reasonable pension pots, having split my career over just 2 financial services firms, spending a similar time with each. I could therefore keep one pension intact and receive the usual index linked monthly pension, and transfer the other to a drawdown fund. Fortunately the provider was giving favourable transfer multiples and, despite Covid, the fund value has far outperformed forecasts. I haven't had to draw down yet as the plan is to utilise other savings before doing so, given low interest rates.
> 
> You do need to get advice to do such a transfer, but the costs are deducted from the fund, and for me, it was certainly worth it.


Could I ask, what was it about the advice that you found worthwhile? Did they find you a better provider/fund than you could have found solo, or was it about saving hassle, or what?


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## cougie uk (13 Feb 2021)

mikeIow said:


> Not sure we will ever get rid of the credit cards: if anything, COVID has taught me that cards are king.....but perhaps the number on them will come down a bit! Started to use Monzo as a “entertainment card” to track that....not that it got much use this past year. Made it a personal duty to keep the local pub and another local small brewery going with regular purchases...a sacrifice worth making🍻
> 
> I’ve been reconciling things with Quicken 2000 for 2 decades (& versions prior to that!). I’m quite sad like that
> Still looking for a nice replacement (since I have it running in a Windows 7 virtual machine ). Old dog...looking for a new trick, but the old one just works....
> ...



Cards are excellent for tracking your spends. I haven't been to a cashpoint since January 2020. 

Credit cards - good to have one but I'll only use it if I know I'm not paying any interest or clearing it each month. 

I was lucky that my employer provided pension workshops each year. As has been said - once you've paid off your mortgage and stopped the saving for your retirement - your costs are cut by a fair amount. 

I'm sure there's plenty of people who haven't grasped this yet and think that they'll be needing their full salary to retire. You really don't.


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## SpokeyDokey (13 Feb 2021)

cougie uk said:


> I'm sure there's plenty of people who haven't grasped this yet and think that they'll be needing their full salary to retire. You really don't.



It's amazing how little you need to service the background costs of running your life and house when you have no debt. I've lost track of the number of people I've spoken to over the last couple of decades who are panicking that they will need their full salary equivalent in retirement - they may well do if their salary is low though.


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