Platforms & Pensions
Longevity of pension pot ( Scenario 2 )
8 % 5 % 2 %
500k
400k
£
300k
Age
Returns are inflation-adjusted , based on a £ 400,000 pension pot , drawing an income of £ 24,500 a year after five years . Inflation at 2.5 %.
It is interesting to note that by refraining from drawing down money from the £ 400,000 pot for a further five years ( until the age of 70 ), there ’ s potential for a little more growth , which extends the period of time before the money runs out by a further three years . In this scenario , using both drawdown and a fixed-term annuity seems to offer up significant theoretical benefits to the tune of around three extra years of income . Well done if you ’ ve got this far . I wanted to explore the fact that annuities are making a comeback and could be used as part of a drawdown-based retirement plan . They could be useful for mitigating sequencing risk , particularly now annuity rates are high .
The other point is that this emphasises the value of independent financial advice . It was a struggle to show annuities could work in tandem with a drawdown strategy , whereas a good adviser will add colour and creativity to finding a practical solution . As always , you get what you pay for , and that includes expert advice .
Issue 89 - November 2022 / 73 /