Originally Posted by ashtondav
Here in the UK i can get an indexed linked annuity of 3.5% at 55.
Our main index (FTSE 100) does have a dividend yield of over 3.5% so that's what i'm banking on. Based on that, and the fact i wish to leave nothing to my heirs I think i might take the annuity route.
I've chopped up your reply but the 3.5% IRR isn't much different than the current US annuities. The devil is, of course, in the details which you didn't provide. What impacts the return, what triggers adjustments, what is the minimum guaranteed return. It goes on forever.
As for your heirs, my father retired broke after a career as a mail carrier. I'm sure they are as well paid in Britain as in the US. After almost 20 years collecting his pension, he died with about $120,000 in the bank plus a paid for town house. You might be equally surprised with how quickly your expenses fall after you become an "old fart." That's probably a Yank expression but I'm sure you Brits have something equivalent.
The 3.5% is pretty good if it's "guaranteed" and real. The US and UK are a few of the stock exchanges that never "went to zero" like Germany, Spain, France, an earlier Chine, etc...... I have periodic conversations with people about what the probability is that the US will avoid and total collapse. It always unnerves them. The nice thing about a total collapse is that I probably wouldn't live through it.
I can't comment on English annuities but in the US I've never found one that could compare favorably with laddered CDs. They sound wonderful if you think you'll live forever but be real about your longevity. In the US the real rate of return is about 1 1/2% to 2% lower in an annuity than for laddered CDs.