Wait or not?

Your advice please.

I am 60 end of June07, and due to buy an annuity. My pension pot is £135,000. But annuity rates seem very low, only 6%. Is it advisable to hold on until rates improve? If I do wait, will it effect my benefits?

Thank you.

Reply to
sensible
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It depends on what other income or savings you have available to live off while you wait.

No, it will affect your benefits when you do bring them into effect. Annuity rates will increase the more you wait.

Reply to
Ronald Raygun

6% is actually high given the inflationary environment.

Are you aware of the open market option ?

I'm interested why you're thinking of an annuity rather than income drawdown.

Yes, I believe, that the benefits people will expect you to make use of your pension instead of benefits, and will calculate on the theoretical basis that that is what you have done. Therefore means tested benefits will be reduced.

Daytona

Reply to
Daytona

After my 60th b'day I will have a small income, because I'm a freelance cartoonist.

What is open market option? What is income drawdown?

Reply to
sensible

to take you pension pot to someone other than the company that you invested the principal with.

An alternative to an annuity

e.g:

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tim

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Reply to
tim.....

This is the best unbiased source of information -

Basically for someone not claiming benefits, to get the maximum amount out of a pension, it's a good idea to ensure that you have enough inflation linked income to survive at a subsistence level, and to remove the rest from pension plans as soon as possible via income drawdown and tax free cash and reinvest it in ISAs.

If you're claiming means tested benefits, it may require a different strategy, see

Let us know your thoughts and perhaps we can help further.

hth

Daytona

Reply to
Daytona

Here's the thing:

I'm a freelance cartoonist....but going into semi-retirement, so my income will be halved. I'm married and would like my wife to benefit after my death. Therefore I would need to suplement my income with some sort of pension. (the pot with Scottish Mutual is £135,000) I also have isa and websaver etc for about £120,000.

The annuity route looks very bleak.....lum sum £35,000 then £,5,800 per month for double life....inflation will kill me too.

So what about this drawdown? Is it very risky with equity investments etc? Will I get a bigger monthly sum? Will I be paying big admin fees?

What exactly would you do if you were in my shoes?

Thanks for your help.

Reply to
sensible

CORRECTION.....£5,800 PER YEAR, SORRY.

Reply to
sensible

!
Reply to
Daytona

Key point - inflation (RPI is currently 4.8%) [1] is the enemy, more so, the longer the period of retirement. Consequently, cash and fixed interest savings are suitable only as a temporary home for short term spending. Historically only asset based investments such as property and equities have kept pace with inflation. Over a retirement period, therefore, cash and fixed interest are the most risky, and property and equities the least risky options.

Currently property, both residential and commercial, are in the middle of a boom, both having doubled over the last 5 years, so do not offer value for money. That leaves equities which are closer to (but above) their historic trend.

See this from the Barclays Capital Equity Gilt Study 1899 - 2004

It depends upon the investment. If you use growth or small company based share strategies then it's risky, if you use value strategies then it isn't.

High yield investing is a subset of value investing and is the most successful (and probably boring) strategy over long periods.

If you wish, within the HMCR guidelines of 60-120% of a level annuity rate, it's up to you. An annuity is a once only decision, ID leaves you in control with reviews every 5 years, and you can reduce your capital by taking a high income - your decision

Not if you avoid the usual suspects - banks, building societies, insurance and life companies. Consider Sippdeal & Alliance Trust

If the charges for taking it out of Scottish Mutual are less then 15%, I'd transfer it to Sippdeal or Alliance Trust straight into drawdown taking 25% tax free cash and invest this and all other investment money using high yield strategies. I'd put as much as possible each year into ISAs. I wouldn't add any more to the pension, as the (taxable) income may exceed the personal tax free allowance.

I use the high yield buy and hold strategy (via Sippdeal) mentioned here -

There's some sensible answers to questions of risk in the latest article here -

I presume your questions on benefits are academic as it looks like you have too much capital & income to claim anything ?

hth

Daytona

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Reply to
Daytona

Good full answer, Daytona, many thanks for your time.

Cheers, Sensible

Reply to
sensible

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