This is an updated video to the guidance I gave last year on annuities vs drawdown to reflect the changes in annuity rates.
Retirement planning can be a complex and confusing process, and one of the biggest decisions you'll have to make is how to access your savings. The 2 broad options that you have are annuities and drawdown.
Annuities are back in fashion after rates jumped by 44 per cent in the space of a year.
Annuities are an insurance product that pays out a regular, fixed income in retirement in exchange for a lump sum, usually your pension pot.
In January 2022 the best annuity on offer for a 65-year-old paying £100,000 upfront provided an income of £4,871 a year for life, according to the annuity broker Retirement Line. Now a year later, a 65-year-old could swap £100,000 for an income of more than £7,013 a year.
Annuities are linked to gilt yields, which are bonds issued by the government and these have been increasing alongside the Bank of England base rate. Together with competition from pension providers which has also been pushing annuity rates higher
In October 2022 annuity rates reached their highest level in 14 years, according to Canada Life.
Between July and October the Association of British Insurers reported a 16 per cent rise in annuity sales compared with the previous three months.
This is a big turnaround a retirement strategy that has been deeply unpopular since pension freedoms were introduced in 2015. Annuity sales plummeted when people were given more choice in how they used their retirement savings.
Annuity sales are likely to remain high next year if gilt yields increase further.
It’s likely that market conditions in 2023, market conditions will drive the continuation of current attractive annuity rates making them even more popular.
Anyone interested in purchasing an annuity should shop around to make sure of getting the best rate available.
LINK TO ANNUITY CALCULATOR
[ Ссылка ]
Timestamps
0:00 intro
1:51 how to decide if annuity or drawdown is best for you
4:19 the pros of drawdown
5:51 the downsides to drawdown
6:50 the pros of annuities
8:22 the cons of annuities
9:53 which is better?
