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  1. #1

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    Default DOOM: Annuity rates

    “ Annuity rates 'worse than ever' - here are the alternatives to fixed income

    Annuity rates have dropped by 6pc in each of the past two years

    Annuity rates, which have fallen so much over recent years that most buyers are unlikely to get even their initial investment back, could plunge further, experts have warned.

    Rates have dropped by 6pc in each of the past two years, according to Hargreaves Lansdown, the investment firm. A 65-year-old who buys an annuity with £100,000 would get an annual income of £4,761, compared with £5,066 in 2019 and £5,381 the year before that, Hargreaves Lansdown said. The figures are for annuities without annual rises or an income for a surviving spouse beyond guaranteed payments for the policy’s first five years.

    An annuity converts a lump sum into a guaranteed income for life. The income paid depends largely on interest rates, which is why it has fallen so far. Buyers would in the past typically receive back their original capital plus some interest if they reached their normal life expectancy. But this is no longer the case.“

    Annuity rates 'worse than ever' - here are the alternatives to fixed income

    FOaTw

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    “ An annuity converts a lump sum into a guaranteed income for life. The income paid depends largely on interest rates, which is why it has fallen so far. Buyers would in the past typically receive back their original capital plus some interest if they reached their normal life expectancy. But this is no longer the case.”

    What a scam

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    Quote Originally Posted by AtW View Post
    “ An annuity converts a lump sum into a guaranteed income for life. The income paid depends largely on interest rates, which is why it has fallen so far. Buyers would in the past typically receive back their original capital plus some interest if they reached their normal life expectancy. But this is no longer the case.”

    What a scam
    Pensions advisors have not been recommending annuities for some time now. For most people, taking the tax free lump sum and then drawing down on the remaining capital is usually the better route for so many reasons.

    As always, do your own research and speak to a professional
    Last edited by Whorty; 29th November 2020 at 16:54.
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    I cannot see why anyone would convert a large sum of money into an annuity rather than buy property and high yield bonds and shares and live off the rent + dividends + interest?

    At least that way when you pop off you can leave the wealth to family / Battersea dogs home.
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    High yield bonds?

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    Quote Originally Posted by _V_ View Post
    I cannot see why anyone would convert a large sum of money into an annuity rather than buy property and high yield bonds and shares and live off the rent + dividends + interest?

    At least that way when you pop off you can leave the wealth to family / Battersea dogs home.
    Because taking the cash out of your pension pot and buying a property will result in a big tax bill. The rental return is unlikely to ever offset the tax and the costs of buying a property.

    Like I say, the usual way these days is to take out the tax free lump sum then leave the rest invested inside the pension wrapper. Then, each year, draw down what you need.
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    Quote Originally Posted by AtW View Post
    High yield bonds?
    Yep, plenty of those globally available.

    Royal London Sterling Extra Yield Bond (Class Y) Income Fund Price & Information

    Distribution yield : 5.87%
    Income paid: Quarterly
    Type of payment: Interest

    Templeton Global Bond (A GBP) Income Fund Price & Information

    Distribution yield : 3.68%
    Income paid: Monthly
    Type of payment: Interest

    M&G Global High Yield Bond (Class X) Income Fund Price & Information

    Distribution yield : 3.59%
    Underlying yield : 3.59%
    Income paid: Monthly
    Type of payment: Interest
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    Quote Originally Posted by Whorty View Post
    Because taking the cash out of your pension pot and buying a property will result in a big tax bill. The rental return is unlikely to ever offset the tax and the costs of buying a property.

    Like I say, the usual way these days is to take out the tax free lump sum then leave the rest invested inside the pension wrapper. Then, each year, draw down what you need.
    25% tax free to buy a property outright, the rest goes into stocks, bonds and if you like a 5% punt on gold and Bitcoin.

    Then your rent, dividends and bond interest gives you a steady income. At the end, all this lovely wealth can be handed down rather than vanish into the pockets of those selling annuities, who by the way tend to be very wealthy from it.
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    Or start a new business that will offer them annuities and invest money into class S(hit) bonds

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    Quote Originally Posted by _V_ View Post
    Yep, plenty of those globally available.

    Royal London Sterling Extra Yield Bond (Class Y) Income Fund Price & Information

    Distribution yield : 5.87%
    Income paid: Quarterly
    Type of payment: Interest

    Templeton Global Bond (A GBP) Income Fund Price & Information

    Distribution yield : 3.68%
    Income paid: Monthly
    Type of payment: Interest

    M&G Global High Yield Bond (Class X) Income Fund Price & Information

    Distribution yield : 3.59%
    Underlying yield : 3.59%
    Income paid: Monthly
    Type of payment: Interest
    Ok, clicked links and here is “Performance” data from them -

    1. 27/11/19 to 27/11/20 - 0.66%
    2. -5.27%
    3. 1.73%



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