Pension/Retirement Options

Depends on your circumstances eg tax, other income, life expectancy, spouse, wanting to leave an inheritance etc.

Perhaps take the tax free lump sum (usually 25%) and invest in a mix of equity funds, bonds and cash and buy an annuity with the remainder.

Congratulations !

If you want a low or no risk investment, then you will have to accept the risk of inflation reducing your income, because such investments do not keep pace with inflation once income payments are deducted. Can you clarify whether this is what you want ?

See

which gives you the probability of outperformance of equities, gilts & cash over various time periods during the last 103 years. Source - Barclays Capital Equity Gilt Study. As Andy says, more info required !

Daytona

No other income - house paid for - married - both healthy - not too bothered about leaving anything behind after we have gone!!

I am thinking that the best approach would be to get three or four "plans" from IFAs and then put together a package myself - based on their advice plus any other advice which people offer.

I've just done something similar.

Took the max tax free cash and put the remainder into an Income Drawdown type pension*, which allows me to draw income as and when I need it, up to a Govt specified maximum, but if I don't draw any it stays earning. A major benefit of this is that you still own the capital sum, and can pass on what's left to your beneficiaries, unlike buying an annuity where you lose it even if you die the following week. With the drawdown pension I chose you can specify (and change) what funds you want it invested in. I chose 3 ranging from moderately cautious to moderately adventurous. These drawdown pensions usually have to be arranged via a financial adviser.

The tax free cash I invested in a (non fixed term) bond, which again allows me to draw an income, and to have the money invested in a range of funds (which can be changed), so again I can spread my risk. Some come with a built in life insurance that guarantees a minimum return value when you fall off the perch.

A bit more risk compared to an annuity, but I have a lot more control, and I retain ownership of my lifetimes pension savings.

May be worth thinking about. David

• also called an Unsecured Pension

Good stuff - many thanks - that sounds like what I need also - did you research and do it yourself - or did you go with an IFA and pay commission?

Paying commission can be a bit old hat these days. You might just pay a fee. In fact, if you are thinking of seeing what several IFAs come up with and amalgamating their ideas, you'd be fairer to them to pay each a fee for their work rather than have just one get paid when you do the business with him.

Rob Graham

I used a "semi tied" FA that I've known and used for many years and always found very good. He gets paid via commission on the products he sells, although he has access to products from a range of companies. (email me direct if you would like contact details). However I also did my own research, even down to individual fund selection, just to provide a point of comparison for his recommendations, resulting in him doing quite a bit of research for me in order to find options that I thought interesting. He will also meet with me for 6 monthly reviews at no additional cost to me. In the end I'm very happy with what I've ended up with, although of course only time will tell if the investments perform well. David.

investments

Age? What about state pensions, are you/will you both be entitled to a full one? SERPS? Don't forget to include these in your calculations (the basic state pension alone will be 9000pa if you're both entitled to a full one).

For instance if you're a few years off the state pension age you could use the tax free 25% to make your income up before you get the state pension.

If you are risk averse I'd think carefully about drawdown - it's quite a risk. Annuity rates may look crap - but the reality is that they are the only way of guaranteeing an income for the rest of your lives. (And the rates aren't really bad anyway when you compare with similar risk investments).

The rates aren't really bad, but you are giving away the whole of your capital sum (350k in the OPs case) to guarantee a "not really bad" income. No wonder insurance companies can afford such splendid office buildings!

Each to his own of course, I just think that people should be aware of other options before jumping into an annuity.

David.

No you're not - because the rate includes return of capital. Which if you live longer than expected, can be more capital than you gave them, and of course if you don't live as long as expected, it will be less (but if you're not bothered about leaving an inheritance that hardly matters).

Do you really think annuity providers' charges are more than providers of other investments (such as those you invest your drawdown fund in)? AIUI their charges are far less than the average unit trust etc.

Of course. But there is a tendancy to dismiss annuities because of seemingly low rates by people who think it's easy to get better value from some other form of investment. You can only do that by taking risks, which the OP didn't seem happy with.

Nevertheless the rates do seem to be lower than they should be. They are barely any more than one can get on deposit, with no return of capital.

tim

capital.

Deposit accounts that give you a guaranteed long term (20+ years) fixed rate??

Annuities invest in long dated gilts, on which yields are currently around 4.25%. On a life expectancy of 20 years, this would return a rate of 7.52% with no charges. That's pretty close to the rates a 65 year old man would get.

Also bear in mind that the average person buying a standard annuity will tend to have a longer life expencancy than an average person of that age, since those who have health problems, or are smokers etc and so are known to have a shorter life expenctancy are less likely to buy an annuity (until they have to when they get to 75), and if they do will buy an impaired life annuity.