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Interesting what has happened with annuities. Back in the day, you had to take one. I took mine from my private pension from age 60- I believed the actuaries had not advanced life expectancy sufficiently and that returns would fall in future. Sure enough, I checked at 65, and I would have got slightly less (despite having had 5 years payments already). Same thing at 70. One of my best gambles... Inflation, especially in retirement, is very personal. As you know, mine is very low. I took my annuity level, since both my partner and I's state pension would be inflation linked, as would her teachers pension, and my contracted out pension. Total pensions rise way above inflation every year (esp. with triple lock).
Thanks Mike. I have noticed that annuity rates are beginning to creep up ever so slightly, perhaps the beginning of a recovery in rates alongside an increasing interest rate cycle. Maybe the bottom is in for rates and life expectancy has flattened?
When you say drawing down from the fund , I gather you mean selling units . So could you explain the various drawdown strategies that are considered to be reasonable. I’m 69 and looking to do this 😊
Thanks Ed, this is all great info. Can I ask - I have 5 pensions, 3 of which are frozen, 1 which I pay a laughably small payment into which I haven't increased since I started it, and a workplace pension scheme. One of these has a GAR, but ignoring that for now, when I come to retire how do I go about pooling these funds to buy an annuity (or any of the other drawdown style strategies you've outlined)? Would it just be a case of find an annuity supplier and giving them the fund details to make the purchase from? Thanks in advance!
Hi Edmund. Im ready to commence my Sipp and wanted to take £12570 from my taxed element and spread my 25% of LTA evenly over the next 10 years. I’m being told by Aviva they don’t do phased drawdown like this! I thought SIPPS were flexible? Any thoughts??
That's very disappointing that they won't facilitate phased drawdown and likely something you would only find out when you come to take the pension. Looking at the key facts document for the Aviva SIPP it sounds like the closest option is to take the tax free cash you need up front and then the taxable element as a monthly income. Alternatively its transferring to another provider. As you say you would expect more from something calling itself a SIPP but ultimately the term is loosely used by providers and primarily is associated with the underlying investments options and ability to self select.
@@EdmundBaileyUK thanks for coming back and really appreciate it. Have really enjoyed your RU-vid clips and find you the most informative doing what you do. Thanks again 👌🏻
Hi Edmund - so if I go for the 5 year fixed annuity in your example, I have £75k and take out £3,178 p.a. (= £15,890 over that period total), which means that I would have £59,110 left, however you are saying that I'd have £65,527 guaranteed at maturity - seems like a no brainier as I'm getting back £6,417 more than I received or am I missing something - why is this ??
Yep that’s correct. As you are being compensated for giving money to a company that will then use the money to invest. They are giving you a small return above the rate of cash but below the rate that you could potentially get via an equity investment but without the risk. It’s a nice balance between an annuity and drawdown! Thanks for the comment. 👍
Hello Edmund, having vinge- watched your interesting videos, I am thinking SIPP seems to make a lot of sense especially to save for retirement. If there are two directors in a company is it OK to do employer pension contributions to only one of the directors ( as the other director already has other pension contributions and therefore will go over the 40K allowance). Please could you clarify.
Thanks Hannah as directors of the firm they will have a high degree of flexibility in terms of high contributions are made to their pensions, there is nothing in terms of pension rules that would prevent you doing that and I’m assuming that’s in line with their contracts, if they have contracts of employment in place which they might not.
@@EdmundBaileyUK many thanks for the clarification. I was only asking because I was told that in case of dividends the directors need to receive dividends in proportion to their percentage share hiding in the company, so I extrapolated the same if applicable for employer pension contributions. Many thanks once again. Your prompt response is much appreciated.
Thanks Hannah. They need to be mindful of annual and lifetime allowances also that contributions pass the wholly and exclusively for the purposes of trade test, which your accountant can check.
@@EdmundBaileyUK many thanks again. You are so thorough. Yes the reason only one of the directors want to take the employer pension contribution us because of the annual/ carry forward limit being exceeded for the other director. Much appreciated I wish I had found your channel earlier. Keep up the great work !
