Annuities v Drawdown pensions

[life on mars]

Re: Annuities v Drawdown pensions

Saw this Pension drawdown is widely considered to be more flexible than an annuity, but it can carry greater risk. ... However, if your fund isn't managed carefully your money could run out in early retirement. Annuity. An annuity provides certainty in retirement, but lacks the flexibility drawdown can provide.

[Taunton Blue Genie]

Re: Annuities v Drawdown pensions

Saw this Pension drawdown is widely considered to be more flexible than an annuity, but it can carry greater risk. ... However, if your fund isn't managed carefully your money could run out in early retirement. Annuity. An annuity provides certainty in retirement, but lacks the flexibility drawdown can provide.

Good lord, I would never have guessed.

[Re-sign Carl Dale]

Re: Annuities v Drawdown pensions

Speak to more than one person. It isn't an exact science and even accredited people can give bad advice, or advice that would suit their vision of a future life more than yours.

Absolutely- recommend speaking to more than one, and go with who you are comfortable with. Check out what level of ongoing advice and support is offered, this is crucial if drawdown is the selected route.

The standard of advice is much better than in the past, and there shouldn’t be any rogues (although one or two do exist) - it’s more a case of finding someone you you have confidence that they will be in with you for
along term. The clients I enjoy working best with have been clients for 10-20 years and I care as much about their finances as I do my own.

[Re-sign Carl Dale]

Re: Annuities v Drawdown pensions

Unless post Brexit inflation has a say, putting a lump of cash into Premium Bonds is a very safe way to look after your cash....and a bit of monthly fun seeing if you have won anything. Slightly more interesting than a bank statement showing your 0.01% cash fund growth.

Premium Bonds are great for a short term slush fund and I often recommend them. Over the longer term they are a very poor choice though and your money will be eaten away by inflation. The prize fund is has traditionally always been less than the real rate of inflation in retirement, particularly if you take into account Martin Lewis’s argument that the typical returns are artificially skewed by the very small number of very large winners.

[Gofer Blue]

Re: Annuities v Drawdown pensions

I would never convert all, or even a large percentage, of my pension portfolio into cash unless someone offered me a crystal ball to let me know exactly when the next crash was coming! Currently I have about 10 months-worth of pension payments in cash, the rest is still invested. I cashed in a chunk a while back when the indexes and my pension pot were at a high point to see me through the COVID crisis and the inevitable BREXIT hysteria. Hopefully by next autumn things will look a lot better.

I have learned not to panic, having had my income drawdown scheme since 2007 and have seen some significant peaks and troughs over that time. As I said in my earlier post my pension pot shrank by 25% in a matter of a few weeks in March/early April but has bounced back to within about 5% of where it was. When the markets open next I hope to see a further rise thanks to the certainty about BREXIT.

Regarding IFA's - I have one and he is ok in as much as he has designed a very broad and "moderate risk" portfolio with a mix of bonds, gilts and stocks from around the world which has performed very well overall. For example my pot is still worth what it was in January despite having taken 12 months pension payments out in the meantime. The final decision always rests with me though - he will recommend rather instruct and sometimes I feel a bit out of my depth, relying 100% on his advice. There have only been a couple of occasions where I have "done my own thing" and these have worked out very well amazingly. These are funds linked to green energy/technology which I think are a good bet for the near future.

[Taunton Blue Genie]

Re: Annuities v Drawdown pensions

Many thanks for the contributions on this thread by those who obviously know quite a bit about the subject.
The pension pots concerned are not huge and, in fact, I will be able to live OK without even tapping into them (due to other fixed pension income that will come on stream).
However, if any of you qualified gentlemen would like to charge me for a session with you to discuss such things please drop me a private message.

[dandywarhol]

Re: Annuities v Drawdown pensions

I was lucky enough to finish on a final salary pension.
The downside to this is if I kick the bucket and have no partner/wife it dies with me.

[chris lee]

Re: Annuities v Drawdown pensions

I am 27 and recently started retirement saving. I found 3 mutual funds one was a FTSE 100 index (acc), another was S&P 500 (acc), and the Rathbone Global opportunities fund (acc).

Put 1k in each and was going to top them up by £50 each a month so £150 a month private savings.

this is all done via a stocks and shares ISA.

I did this following advice from people I trust, and the potential results seem to be to good to be true. While they all have certainly had negative years,
All of these funds have performed at close to 10% average return over a 5+year period, in fact when you look longer at the market index's over 20-30 years it is more like 12%+

this means that if you invest £100 a month in one fund for a 40 year period with a average long term return of 10% that fund will be worth aprox 1.2 million within 30 years.

I have read a few finance books (money makeover - dave ramsey, I can make you rich, and rich dad poor dad) and the general consensus about investing in good, safe growth stoke mutual funds all seems to be the same.

If this is true, then we are we not all taught this in school lol, £100 a month for 40 years and you can potentially retire with a million in the bank.


here is Dave Ramsey explaining the Maths a lot better than me:

https://www.youtube.com/watch?v=7wjuCgtL0yA&list=LL&index=2&ab_channel=TheDaveRamseyShow

am I being taken for a mug? or is this good advice I am following?

[Re-sign Carl Dale]

Re: Annuities v Drawdown pensions

I am 27 and recently started retirement saving. I found 3 mutual funds one was a FTSE 100 index (acc), another was S&P 500 (acc), and the Rathbone Global opportunities fund (acc).

Put 1k in each and was going to top them up by £50 each a month so £150 a month private savings.

this is all done via a stocks and shares ISA.

I did this following advice from people I trust, and the potential results seem to be to good to be true. While they all have certainly had negative years,
All of these funds have performed at close to 10% average return over a 5+year period, in fact when you look longer at the market index's over 20-30 years it is more like 12%+

this means that if you invest £100 a month in one fund for a 40 year period with a average long term return of 10% that fund will be worth aprox 1.2 million within 30 years.

I have read a few finance books (money makeover - dave ramsey, I can make you rich, and rich dad poor dad) and the general consensus about investing in good, safe growth stoke mutual funds all seems to be the same.

If this is true, then we are we not all taught this in school lol, £100 a month for 40 years and you can potentially retire with a million in the bank.


here is Dave Ramsey explaining the Maths a lot better than me:

https://www.youtube.com/watch?v=7wjuCgtL0yA&list=LL&index=2&ab_channel=TheDaveRamseyShow

am I being taken for a mug? or is this good advice I am following?

This is spot on advice ... you can’t go wrong with Dave Ramsey and the FIRE movement. Check out “The Simple Path to Wealth” by JL Collins or anything by Nick Murray!

In the UK these investments are usually known as Unit Trusts or OEICs rather than Mutual Funds, but essentially the same ... bizarrely many people in the Uk subconsciously associate any investing with “high risk” and negative, in the US it’s better understood (or more likely better explained).

I totally agree about the education system. I trained as a school teacher before becoming a financial planner, and the level of financial illiteracy in the UK is crazy!

Learning about how credit cards work, compound interest, budgeting and investing are far more valuable to most people than learning about Pythagoras, quadratic equations and how ox-bow lakes are formed!

[Taunton Blue Genie]

Re: Annuities v Drawdown pensions

This is spot on advice ... you can’t go wrong with Dave Ramsey and the FIRE movement. Check out “The Simple Path to Wealth” by JL Collins or anything by Nick Murray!

In the UK these investments are usually known as Unit Trusts or OEICs rather than Mutual Funds, but essentially the same ... bizarrely many people in the Uk subconsciously associate any investing with “high risk” and negative, in the US it’s better understood (or more likely better explained).

I totally agree about the education system. I trained as a school teacher before becoming a financial planner, and the level of financial illiteracy in the UK is crazy!

Learning about how credit cards work, compound interest, budgeting and investing are far more valuable to most people than learning about Pythagoras, quadratic equations and how ox-bow lakes are formed!

Thanks for all your contributions, good people - including the helpful individual who PM'd me. You know who you are