Pension/annuity rant
Discussion
I'm sure that this has been done to death, but is it a surprise that people do not want to save for pensions?
I had my annual statement about a small private pension from a company which states "financial strength... in the latest survey we scored 10/10. We are the only life company to achieve this rating for ten years in a row." They charge 0.75% of total pot for a pretty standard managed & with-profits fund.. and say that based on the assumptions.. (retirement at 60, no further contributions, annuity, RPI-linked pension etc) my return will be an annual pension of 1/43rd of the current value of the pot.
??? so, if I retired at 60 I'd have to live to >100 just to get back my capital, regardless of any income on that.... I know that there are restrictions on how life companies can invest annuities, Q.E. etc but really, this is taking the p+++.
I'm not too fussed as 1) I have made other plans, 2) I don't spend that much time fretting about it, having seen several people end up never living to draw the pension they have stressed over, 3) general economic failure / QE is something we can't control.
I had my annual statement about a small private pension from a company which states "financial strength... in the latest survey we scored 10/10. We are the only life company to achieve this rating for ten years in a row." They charge 0.75% of total pot for a pretty standard managed & with-profits fund.. and say that based on the assumptions.. (retirement at 60, no further contributions, annuity, RPI-linked pension etc) my return will be an annual pension of 1/43rd of the current value of the pot.
??? so, if I retired at 60 I'd have to live to >100 just to get back my capital, regardless of any income on that.... I know that there are restrictions on how life companies can invest annuities, Q.E. etc but really, this is taking the p+++.
I'm not too fussed as 1) I have made other plans, 2) I don't spend that much time fretting about it, having seen several people end up never living to draw the pension they have stressed over, 3) general economic failure / QE is something we can't control.
Revisitph said:
??? so, if I retired at 60 I'd have to live to >100 just to get back my capital, regardless of any income on that.... I know that there are restrictions on how life companies can invest annuities, Q.E. etc but really, this is taking the p+++.
No. It's index linked, so that's not right at all.James_B said:
No. It's index linked, so that's not right at all.
Well, during that time I am assuming that the annuity providers invested your pension pot in a prudent fund +/- gilts (the type of fund which the annuity providers would surely invest in to ensure that not only did they pay you an indexed 1/43rd of your capital p.a. but leave them with a tidy sum when you die) which would provide your guaranteed annual indexed income but also, from their (expert end expensive) investment strategy, a little left over/or not too much attrition of "your" capital.. Granfondo said:
CoolHands said:
Retiring at 60 is young
Depends how long you live! 
James_B said:
I was responding to your incorrect claim that it will take forty years to get your capital back.
It won't, as your payment is index linked, it will increase over time.
It's worth understanding how the pension works, and familiarising yourself with the numbers rather than getting upset over a misunderstanding.
I'm not upset, merely suggesting that an if there is there is a well-invested annuity, it should be able to provide a better return than [whatever index it is linked to] plus a gradual reduction of the capital over the predicted remaining lifespan of the beneficiary of the annuity. Surely that is the premise on which the annuity / pensions industry is based?It won't, as your payment is index linked, it will increase over time.
It's worth understanding how the pension works, and familiarising yourself with the numbers rather than getting upset over a misunderstanding.
A simple soul, my understanding from your response is that if it "is index linked it will increase over time" - fine, though if 1) the index is negative, surely it will decrease, and 2) if positive, and the increase is only in line with the index, then it will still take 40+ years to recoup 1/40th+ of the capital?
"If you give me a small contribution, I'll give you a small pension"
An old saying, but still true. Plus you need to bear in mind that annuity rates are based on gilt yields, so currently not great. Stop moaning and do something positive- transfer it out into a SIPP, choose some more ambitious investment funds, and then when you take your pension, choose drawdown rather than buying an annuity.
Or keep b
hing. I'm not bothered 
An old saying, but still true. Plus you need to bear in mind that annuity rates are based on gilt yields, so currently not great. Stop moaning and do something positive- transfer it out into a SIPP, choose some more ambitious investment funds, and then when you take your pension, choose drawdown rather than buying an annuity.
Or keep b
hing. I'm not bothered Revisitph said:
I'm not upset, merely suggesting that an if there is there is a well-invested annuity, it should be able to provide a better return than [whatever index it is linked to] plus a gradual reduction of the capital over the predicted remaining lifespan of the beneficiary of the annuity. Surely that is the premise on which the annuity / pensions industry is based?
A simple soul, my understanding from your response is that if it "is index linked it will increase over time" - fine, though if 1) the index is negative, surely it will decrease, and 2) if positive, and the increase is only in line with the index, then it will still take 40+ years to recoup 1/40th+ of the capital?
You stated that your quote was RPI linked.A simple soul, my understanding from your response is that if it "is index linked it will increase over time" - fine, though if 1) the index is negative, surely it will decrease, and 2) if positive, and the increase is only in line with the index, then it will still take 40+ years to recoup 1/40th+ of the capital?
Looking back at historic RPI to 1960 shows that RPI has never been negative over this period of time.
As your annual pension is RPI linked, it will increase by RPI each year, hence it won't take 43 years to get your back your capital.
http://www.heraldscotland.com/opinion/15428293.Iai...The_great_pensions_scandal___one_more_blow_before_the_robots_take_over/
Yipper said:
You need a >£1m private pot for a good retirement, nowadays.
Or, if you are under 40, get a job in the public NHS and contribute > 7% of pay every month until retirement.
Private pensions are not what they once were.
Have to agree on the target pension pot required for a half decent retirement. Or, if you are under 40, get a job in the public NHS and contribute > 7% of pay every month until retirement.
Private pensions are not what they once were.
Edited by anonymous-user on Tuesday 1st August 06:36
Revisitph said:
I'm not upset, merely suggesting that an if there is there is a well-invested annuity, it should be able to provide a better return than [whatever index it is linked to] plus a gradual reduction of the capital over the predicted remaining lifespan of the beneficiary of the annuity. Surely that is the premise on which the annuity / pensions industry is based?
A simple soul, my understanding from your response is that if it "is index linked it will increase over time" - fine, though if 1) the index is negative, surely it will decrease, and 2) if positive, and the increase is only in line with the index, then it will still take 40+ years to recoup 1/40th+ of the capital?
The index isn't negative, though, it's positive. I was taking it from where I was trading 40 year inflation yesterday.A simple soul, my understanding from your response is that if it "is index linked it will increase over time" - fine, though if 1) the index is negative, surely it will decrease, and 2) if positive, and the increase is only in line with the index, then it will still take 40+ years to recoup 1/40th+ of the capital?
Why don't you tell me what annuity would be "mid-market", though, if there was no-one taking any profit?
It seems like you've not run the numbers at all, and are just sort of assuming it should be more.
James_B said:
The index isn't negative, though, it's positive. I was taking it from where I was trading 40 year inflation yesterday.
Why don't you tell me what annuity would be "mid-market", though, if there was no-one taking any profit?
It seems like you've not run the numbers at all, and are just sort of assuming it should be more.
Exactly! Too many people moaning and not understanding what they are moaning about.Why don't you tell me what annuity would be "mid-market", though, if there was no-one taking any profit?
It seems like you've not run the numbers at all, and are just sort of assuming it should be more.
Current market price (swaps for 30-year RPI inflation is circa 3.5%).
EddieSteadyGo said:
Yipper said:
You need a >£1m private pot for a good retirement, nowadays.
Or, if you are under 40, get a job in the public NHS and contribute > 7% of pay every month until retirement.
Private pensions are not what they once were.
Have to agree on the target pension pot required for a half decent retirement. Or, if you are under 40, get a job in the public NHS and contribute > 7% of pay every month until retirement.
Private pensions are not what they once were.
Edited by EddieSteadyGo on Tuesday 1st August 06:36
Granfondo said:
EddieSteadyGo said:
Yipper said:
You need a >£1m private pot for a good retirement, nowadays.
Or, if you are under 40, get a job in the public NHS and contribute > 7% of pay every month until retirement.
Private pensions are not what they once were.
Have to agree on the target pension pot required for a half decent retirement. Or, if you are under 40, get a job in the public NHS and contribute > 7% of pay every month until retirement.
Private pensions are not what they once were.
Edited by EddieSteadyGo on Tuesday 1st August 06:36
The average UK pensioner retired with a ~£175k private pot in 2016.
In other words, the vast majority of pensioners only receive £500-1000 a month from their private pensions or annuities.
The best way, by far, to get a good pension is to work for the NHS, Fire Service, or work your way to the top 5% of positions in your local council.
Yipper said:
Less than 5% of private pension pots reach £1m.
The average UK pensioner retired with a ~£175k private pot in 2016.
In other words, the vast majority of pensioners only receive £500-1000 a month from their private pensions or annuities.
The best way, by far, to get a good pension is to work for the NHS, Fire Service, or work your way to the top 5% of positions in your local council.
I.e. get someone else to fund the majority of your pension?!The average UK pensioner retired with a ~£175k private pot in 2016.
In other words, the vast majority of pensioners only receive £500-1000 a month from their private pensions or annuities.
The best way, by far, to get a good pension is to work for the NHS, Fire Service, or work your way to the top 5% of positions in your local council.
Gassing Station | Finance | Top of Page | What's New | My Stuff