Annuities are one of the biggest cons it is possible to find in the world of pensions and finance.Take the case of Sammy Bloggs who takes his pension pot and turns it into an annuity at age 65 and then lives for twenty years.
Today, he would be lucky to be getting 4% an annum as income. Even a £100k pot would be yielding less than £80 per week.
Assuming all variables remain the same throughout the term he will have taken out only 80% of the initial value.
Do not imagine that this means a profit of 20k for the insurance company - no!
Remember that they have invested the original, capital sum and have been paying out peanuts for two decades. It would surprise me immensely if they do not make considerably more than the original capital sum!
I have just spent much time with my financial adviser reviewing all such matters.
Intelligent cashing of lump sums and strategic 'draw downs' can maximise the benefits from an annuity. AND - never forget to shop around for the best deal as the Sunday Telegraph reveals that this can easily cost up to 35% of the worth of your pension if not done carefully!
When you reach that point in your life TAKE INDEPENDENT FINANCIAL advice. Paying hundreds could save thousands!
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