Do annuity rates differ much?

[MntnMan62]

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.

 

[mikeIow]

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.

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

 

[MntnMan62]

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

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.

 

[ianrauk]

@swee'pea99
Which Magazine drawdown calculator HERE

 

[mikeIow]

@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

 

[swee'pea99]

@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. )

 

[Brads]

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.

 

[mikeIow]

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.

Banned for life?
Are you President Trump?

 

[Brads]

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.

 

[SpokeyDokey]

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:
View attachment 568691
if interested just message me. ONLY if you are comfortable with spreadsheets, but nothing is hidden, all visible!

cheers

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.

 

[Brads]

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

 

[mikeIow]

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.

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....

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

 

[slowmotion]

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....


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

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.

 

[mistyoptic]

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

 

[ianrauk]

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