PLATFORMS
UNTIL FAIRLY RECENTLY,
PENSIONS WERE DARK,
MYSTERIOUS THINGS
THAT WE PAID INTO
UNTIL WE RETIRED AND
RECEIVED AN AMOUNT
OF MONEY BACK AGAIN
retirees have faced a crash at the
point of retirement when they have
had to buy an annuity, so not having
to cash in your pot at a certain point
seems to be a red herring.
Most investors have seen their
portfolio rise and fall in the
accumulation phase so it is sensible
to assume it will happen while you
are decumulating.
Then there’s the elephant in the
room – when will you actually
die?
MONTHLY INCOME OF AN ANNUITY VS. DRAWDOWN
3,000
Annuity rate
3,000
Drawdown
3,000
3,000
3,000
3,000
2,000
1,000
0
£75,000
£100,000
£250,000
£500,000
£750,000 £1,000,000
PENSION POT AT RETIREMENT AGED 65
£75,000 £100,000
£250,000
£500,000 £750,000 £1,000,000
Annuity rate
308
418
1,046
1,882
3,039
4,053
Drawdown
560
750
1,900
3,800
5,700
7,600
Assumptions: Bar charts show monthly income in retirement at 65 years old. Annuity rates
courtesy of Saga website, 15/03/2015. Standard annuity rates quoted, as opposed to enhanced
annuity. Drawdown assumptions are that non-drawn down money remains invested and grows at
8 per cent per annum net of all fees, taxes and charges. Lastly, we assume that your drawdown
pension pot will be exhausted at 90 years old. State pension not included in either figure.
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