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Savings and Investments thread

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  • Dippenhall
    Dippenhall Posts: 3,922
    There’s only one thing to understand about an annuity, it’s insurance against living too long.

    You will not be able to plan with precision whether to buy an annuity or not unless you know when you will die.

    Statistically, on average, buying an annuity delivers value when purchased after age 70 but less likely at younger ages.
  • golfaddick
    golfaddick Posts: 33,735
    wwaddick said:
    Anybody know whether purchased life annuities compare rates-wise to pension based ones?
    I believe they are the same. They are still based on life expectancy so I don't think it matters where the money comes from. 
  • bobmunro
    bobmunro Posts: 20,880
    Dippenhall said:
    There’s only one thing to understand about an annuity, it’s insurance against living too long.

    You will not be able to plan with precision whether to buy an annuity or not unless you know when you will die.

    Statistically, on average, buying an annuity delivers value when purchased after age 70 but less likely at younger ages.

    All makes sense and I can see it being of value for some older pensioners to purchase an annuity out of residual savings to guarantee an ongoing income to supplement the State pension in later life.
  • CafcWest
    CafcWest Posts: 6,183
    I've thought about an annuity - currently I have 2 final salary pensions that I get and money in an HL Sipp that I drawdown monthly - one thing I've never understood is what happens to an annuity on death.  Does it just stop paying out or is there a residual value that gets paid to dependants?  With the SIPP in drawdow, obviously whats in the pot (on death) is left to my dependants.
  • Diebythesword
    Diebythesword Posts: 341
    CafcWest said:
    I've thought about an annuity - currently I have 2 final salary pensions that I get and money in an HL Sipp that I drawdown monthly - one thing I've never understood is what happens to an annuity on death.  Does it just stop paying out or is there a residual value that gets paid to dependants?  With the SIPP in drawdow, obviously whats in the pot (on death) is left to my dependants.
    Isn’t the whole point of annuity is you effectively sell a chunk/all of your pension for a regular payment in perpetuity until you die? The agreement is between you and the annuity provider so would be complete when you die? 
  • BalladMan
    BalladMan Posts: 1,138
    Diebythesword said:
    CafcWest said:
    I've thought about an annuity - currently I have 2 final salary pensions that I get and money in an HL Sipp that I drawdown monthly - one thing I've never understood is what happens to an annuity on death.  Does it just stop paying out or is there a residual value that gets paid to dependants?  With the SIPP in drawdow, obviously whats in the pot (on death) is left to my dependants.
    Isn’t the whole point of annuity is you effectively sell a chunk/all of your pension for a regular payment in perpetuity until you die? The agreement is between you and the annuity provider so would be complete when you die? 
    You can get single life or joint life annuities.  Single life ends on death, joint life on death of both parties. 

    There are other annuity options such as guarenteed period and value protection annuity, but these obviously cost more / provide a lower ROI. 

    Choosing the right product is very specific to your circumstance and an IFA will more than pay for their fee to advise you properly based on circumstances and levels of risk appetite.  
  • golfaddick
    golfaddick Posts: 33,735
    BalladMan said:
    Diebythesword said:
    CafcWest said:
    I've thought about an annuity - currently I have 2 final salary pensions that I get and money in an HL Sipp that I drawdown monthly - one thing I've never understood is what happens to an annuity on death.  Does it just stop paying out or is there a residual value that gets paid to dependants?  With the SIPP in drawdow, obviously whats in the pot (on death) is left to my dependants.
    Isn’t the whole point of annuity is you effectively sell a chunk/all of your pension for a regular payment in perpetuity until you die? The agreement is between you and the annuity provider so would be complete when you die? 
    You can get single life or joint life annuities.  Single life ends on death, joint life on death of both parties. 

    There are other annuity options such as guarenteed period and value protection annuity, but these obviously cost more / provide a lower ROI. 

    Choosing the right product is very specific to your circumstance and an IFA will more than pay for their fee to advise you properly based on circumstances and levels of risk appetite.  
    My PA comes in rather handy sometimes...😉😄
  • Southbank
    Southbank Posts: 5,274
    PragueAddick said:
    Diebythesword said:
    us futures up again this morning. 
    Jolly good. Might reach my next step target for selling more of my tech fund holdings.

    And where then will I get growth from, you might reasonably ask. WelI I'm liking the performance of my Japanese funds (thanks to the Golfmeister for selecting good ones for me). And big things are expected from the new female PM, although there is an ongoing question whether she will be less a Japanese Thatcher (as she likes to portray herself) and more a Japanese Truss😱. 

    Line no always go up....
    Regarding your tech sales, Warren Buffet once said 'Selling your winners and holding your losers is like cutting the flowers and watering the weeds'.
    Apple is his biggest stock holding still, despite his wariness of AI.
  • Ashers
    Ashers Posts: 419
    golfaddick said:
    wwaddick said:
    Anybody know whether purchased life annuities compare rates-wise to pension based ones?
    I believe they are the same. They are still based on life expectancy so I don't think it matters where the money comes from. 
    The main difference is the tax treatment. A pension annuity is fully taxable as income at your marginal rates. The income from a PLA is effectively split in two. Part of the payment is treated as a return of your original capital and is not taxed, the remaining part is taxed as savings income (interest).
  • golfaddick
    golfaddick Posts: 33,735
    Ashers said:
    golfaddick said:
    wwaddick said:
    Anybody know whether purchased life annuities compare rates-wise to pension based ones?
    I believe they are the same. They are still based on life expectancy so I don't think it matters where the money comes from. 
    The main difference is the tax treatment. A pension annuity is fully taxable as income at your marginal rates. The income from a PLA is effectively split in two. Part of the payment is treated as a return of your original capital and is not taxed, the remaining part is taxed as savings income (interest).
    I agree, but I don't think any of that changes what rate of annuity you would receive......which was the question. 

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