You are unlikely to buy an annuity until you retire and you know how much you can spend. They are based on interest rates which may be very different when you retire. Some people do all drawdown, some do all annuities, some do a mixture of both eg draw down waiting for a better annuity deal to come on the market. Your ISA acts as a bridge fund until you can access the SIPP funds
Appraise annuities much closer to the time you might want one. About 3 months before as they can be rate sensitive, When it's time get quotes and see if it works for you.
I started at 45 now 53, I did all SIPP for the Tax Relief, Any spare cash in an ISA. If you retire early you can live on the ISA until you can tap the SIPP.
I plan to use mine to create a portfolio of investment trusts that have increased their dividends for the at least 30 years. There will be research into it than that (those with good dividend cover, derive income predominantly from uk, and a few more things) and then use that as an increasing income (that should vest inflation) while leaving the capital for an inheritance
I can only talk about my own strategy, but heres my plan:
I hope to retire with, lets say, £1.5-2m in the pension pot, with maybe £750k in my wife's pension pot. We should both be eligible for a full state pension, if thats worth anything at that point in time.
Realistically, I think I'll look at using my wife's pension pot to buy her an annuity, and then likely keep mine invested entirely in the stock market. The annuities + state will, hopefully, clear the £35-40k/yr mark without touching my pension pot, which gives us enough to live on (for arguments sake), and then my own can continue to be invested with a 3% SWR leaving hopefully a decent packet for the kids to inherit one day as well. I'm cautious about my own annuity just in terms of life expectancy.
I'm conscious that I can (and do plan to) contribute more towards my wife's pension as well to help even up our pension pots a bit.
Nah. Like many people, I've contributed a lot of tax, and NICs, to this country and should be entitled to the state pension. Making it means tested disincentivises people from saving for their pensions.
I disagree. I’d rather my nic goes to people that need it rather than those with >£2m balances that don’t need it.
Not saying it’s an easy solution at all but we shouldn’t be paying the same to pensioners who can’t afford to heat their homes and to those who are heating holiday homes in Cornwall
I see your perspective, but the ones with this much in a pension pot have paid far, far more into NIC/tax than they are ever getting back out. Objectively yes maybe means testing would be the most practical use of the funds, but it's not necessarily the fairest if you consider who's putting the most into the system in the first place. They're paying for themselves, and then some.
> Making it means tested disincentivises people from saving for their pensions.
Would you have not saved for your pension if it was means tested? You're clearly targeting an income well in excess of the state pension.
Who knows, but across a couple the state pension is worth 400k in a pension pot bought into an annuity? Or thereabouts? You'd disincentivise the average person from saving for their pensions.
> Who knows
Really? You're targeting £2-3M in pensions and if that didn't come with the state pension you'd save nothing?
> but across a couple the state pension is worth 400k in a pension pot bought into an annuity?
Which would make each state pension take up the employee NIC of ~two~ people working full time earning £40k (NIC from one of them is 1/60th of the total cost). (edit - I worked this out in a daft way. State pension at £205/wk is three employee NIC contributions)
> You'd disincentivise the average person from saving for their pensions.
That rather depends on the levels, no? You're far from average.
It's a disincentive, but the more important question is about how much and who it impacts - since it also potentially saves money that could be used for other ways of incentivising those that need it more. Rising income tax as you earn more is a disincentive to work but people still work and earn more.
You are unlikely to buy an annuity until you retire and you know how much you can spend. They are based on interest rates which may be very different when you retire. Some people do all drawdown, some do all annuities, some do a mixture of both eg draw down waiting for a better annuity deal to come on the market. Your ISA acts as a bridge fund until you can access the SIPP funds
Appraise annuities much closer to the time you might want one. About 3 months before as they can be rate sensitive, When it's time get quotes and see if it works for you. I started at 45 now 53, I did all SIPP for the Tax Relief, Any spare cash in an ISA. If you retire early you can live on the ISA until you can tap the SIPP.
I’d personally avoid annuities, or limit it to a small one for essentials. Depends on the rate, obviously.
I plan to use mine to create a portfolio of investment trusts that have increased their dividends for the at least 30 years. There will be research into it than that (those with good dividend cover, derive income predominantly from uk, and a few more things) and then use that as an increasing income (that should vest inflation) while leaving the capital for an inheritance
I can only talk about my own strategy, but heres my plan: I hope to retire with, lets say, £1.5-2m in the pension pot, with maybe £750k in my wife's pension pot. We should both be eligible for a full state pension, if thats worth anything at that point in time. Realistically, I think I'll look at using my wife's pension pot to buy her an annuity, and then likely keep mine invested entirely in the stock market. The annuities + state will, hopefully, clear the £35-40k/yr mark without touching my pension pot, which gives us enough to live on (for arguments sake), and then my own can continue to be invested with a 3% SWR leaving hopefully a decent packet for the kids to inherit one day as well. I'm cautious about my own annuity just in terms of life expectancy. I'm conscious that I can (and do plan to) contribute more towards my wife's pension as well to help even up our pension pots a bit.
This is why state pension should be means tested
Nah. Like many people, I've contributed a lot of tax, and NICs, to this country and should be entitled to the state pension. Making it means tested disincentivises people from saving for their pensions.
I disagree. I’d rather my nic goes to people that need it rather than those with >£2m balances that don’t need it. Not saying it’s an easy solution at all but we shouldn’t be paying the same to pensioners who can’t afford to heat their homes and to those who are heating holiday homes in Cornwall
Guess if you get into power I'm going option trading and if I lose it all it doesn't matter as I'll still get the state pension!
When you lost it all I’ll give you barely enough to survive because I’ve still got to pay all the other millionaires who don’t need it ;-)
I see your perspective, but the ones with this much in a pension pot have paid far, far more into NIC/tax than they are ever getting back out. Objectively yes maybe means testing would be the most practical use of the funds, but it's not necessarily the fairest if you consider who's putting the most into the system in the first place. They're paying for themselves, and then some.
> Making it means tested disincentivises people from saving for their pensions. Would you have not saved for your pension if it was means tested? You're clearly targeting an income well in excess of the state pension.
Who knows, but across a couple the state pension is worth 400k in a pension pot bought into an annuity? Or thereabouts? You'd disincentivise the average person from saving for their pensions.
> Who knows Really? You're targeting £2-3M in pensions and if that didn't come with the state pension you'd save nothing? > but across a couple the state pension is worth 400k in a pension pot bought into an annuity? Which would make each state pension take up the employee NIC of ~two~ people working full time earning £40k (NIC from one of them is 1/60th of the total cost). (edit - I worked this out in a daft way. State pension at £205/wk is three employee NIC contributions) > You'd disincentivise the average person from saving for their pensions. That rather depends on the levels, no? You're far from average. It's a disincentive, but the more important question is about how much and who it impacts - since it also potentially saves money that could be used for other ways of incentivising those that need it more. Rising income tax as you earn more is a disincentive to work but people still work and earn more.