In message , john boyle writes
Just done a calc which shows that at 4% market return on the AVC fund AND on the invested income form the annuity it takes just under 20 years to catch up.
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20 years ago
Question on Market Value Reduction of Pension
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20 years ago
It cannot be true "no matter what annuity or growth rates are". If it's true in practice, it must be because there is a sensible relationship between growth rate and annuity rate, and between annuity rates year-on-year.
Suppose growth rate is 6% and annuity rate this year 7% and next year it's 7.5%. Suppose your AVC fund is £20k.
Then option 1 will buy an annuity paying £1400pa, whilst a 1 year delay will first grow the AVC fund to £21200 and will then buy an annuity paying £1590pa. But to buy an annuity paying £190pa next year would cost £2533. You'd need to be an exceptionally astute investor to turn £1400 into £2533 in just one year, an 81% growth, especially if you only get the £1400 in monthly chunks.
This probably just means that the 6%/7%/7.5% triple is unrealistic.
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20 years ago
"Ronald Raygun" wrote
Yep - try 6% / 7% / 7.1% instead!