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May 2022
2:20pm, 12 May 2022
25,191 posts
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Rosehip
Inflation, Greppers, inflation …..
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May 2022
2:34pm, 12 May 2022
4,491 posts
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WayOfTheDodo
Escalating annuities are a thing. Lower start rate but increase by x% pa or rpi (subject to cap).
The problem with annuities is that the insurance company writing it is not able to take any investment risk with the lump sum, so the rate of return baked into the price is painfully low and they will always feel like poor value for money based on average life expectancy. Obviously good value if you know you live to 110, but then as said elsewhere on this thread needs tends to decrease at older ages too, and the whole point of annuities is the pooling of risk between people who die early and those who live a long time.
The other issue for the life company is that annuities are surprisingly expensive to administer with regular payments to bank accounts that close and annuitants failing to tell you they are dead! Proof of Existence checks every few years are a headache and really upset people! All those costs get built into the price. Oh, and some profit obvs.
V’rap, enhanced annuity rates can be a third or more better. Your scheme is not unheard of, but underwriters will normally look back more than a year to try and find potential adverse behaviour.
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May 2022
2:49pm, 12 May 2022
57,994 posts
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Velociraptor
[I should add that I'm not seriously contemplating taking out an annuity, with or without fraudulent delarations of adverse lifestyle factors. I can see the point of them, but I'll be effectively annuitised with my DB pension and if I get too doddery to manage my own investments at least one of my children has a good grasp of personal finance.]
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May 2022
3:21pm, 12 May 2022
61,606 posts
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Lip Gloss
I come on here and get more confused by the day. I'm wondering if I'll ever have enough money to retire on and I'm so desperate to do it either this Nov or next at the latest.
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May 2022
3:27pm, 12 May 2022
2,451 posts
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Flatlander
I am in the process of trying to get an annuity set up using part of my SIPP.
The formal underwriters' quote for my enhanced annuity is worthwhile. I have selected a level annuity because I worked out that if I took a RPI linked annuity it would take 7-8 years to reach the same annual income as a level annuity, and a further 6 or so years for the total amounts paid to match each other. (Figures not accurate since too many variables are involved, but are a good guide for me)
By which time I would be older than the age the ONS life expectancy calculator gives me!
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May 2022
3:43pm, 12 May 2022
4,492 posts
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WayOfTheDodo
Sorry V’rap, I didn’t mean to imply you would try that, just that it does happen!
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May 2022
3:48pm, 12 May 2022
57,998 posts
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Velociraptor
I know it does, WOTD, or at least people brag about doing it. Nobody has ever tried to get me to collude with it as far as I know but I sometimes waste time reading BTL comments on articles on the financial pages of the newspapers.
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May 2022
4:06pm, 12 May 2022
135,262 posts
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GregP
Interesting post Flatters. I’ll Combe back to that later with dumb questions I suspect.
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May 2022
4:11pm, 12 May 2022
135,263 posts
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GregP
Okay, basics.
Say I have £100,000 and I buy a nuity (or an an nuity as you lot insist on saying). And it gives me £5,000 a year (or an year).
This is better than me putting it into an SIPP (or leaving it in an SIPP) and drawing down £5,000 a year off it? Why’s that then?
Sure Si and/or Bob explained this to me very well a year ago but I haven’t retained the knowledge. Sorry.
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May 2022
4:11pm, 12 May 2022
135,264 posts
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GregP
[and acknowledging Rosers-Hippers’ post earlier this arvo]
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Jigs 
Any pension experts out there?
Oct 2024