Personally, as a "retiree" of more than ten years' standing, I wouldn't touch annuities with a barge-pole. Very few in their right mind, having saved for a lifetime, would willingly part with those hard-earned savings at retirement in return for the promise of an income for life knowing that, if they fell under a bus the next day, their savings would disappear down the plughole.
These are in fact very strong arguments for compulsory annuitization which were in the DNA of the original State supported second pillar. Charlie was not quite right. It wasn't entirely the retiree's own money. Much of it was gifted by the taxpayer especially in tax free roll-up. This was a societal policy and it was valid for the State to put conditions on how benefits would be enjoyed, in the overall societal interests. Hence benefits had to be taken in the form of an annuity with possible reversion to a spouse and I think up to 2 orphans where allowed as well. (Don't ask me where the tax free lump sum came from.)1) I like the idea of telling people emerging from an AE scheme that they can't have all their cash immediately and then become dependent on the state if they blow it - or give it to their kids to get on the housing ladder.
As a contended ARF holder, I can't disagree much, but I also have a lot of sympathy with @Duke of Marmalade 's argument thatDoes anyone have any statistics on how many pensioners have impoverished themselves as a consequence of being offered the ARF freedom,
Unfortunately, ARF's are almost invariably seen as vehicles for estate planning. That was never the intention. Advisers (advisers on the forum, please correct me if I'm wrong) generally advise ARF holders to take the minimum allowable each year (4% or 6%, depending on size, I think) irrespective of how old they are, and to use up other assets for income purposes, or even leave themselves scrimping and scraping when the most advisable course of action - ignoring tax - at older ages (say, above age 80) is to take much more than 6% each year from the ARF.It was never intended for estate planning
Duke, it came from the Civil Servants! They would never give up their tax-free retirement gratuity of 3/80th of salary for each year of service!!(Don't ask me where the tax free lump sum came from.)
Maybe on this forum, and maybe for the very rich, but that's not how my peers see them. Most people in my age group are heading towards future retirement with just enough for them to survive on, and aren't particularly focused on estate planning, although maybe that's a conversation that happens a lot later.Unfortunately, ARF's are almost invariably seen as vehicles for estate planning.
An argument in favour of annuities for sure....I don't get the sense from those who have only a DC pension that this is how they think - they know they can suffer from severe equity downturns, and are very risk focused. An argument in favour of annuities perhaps...
Of course compulsory annuity AE won't happen because the body pension is so infected with the ARF virus. The pensions industry would have a field day promoting their ARF magic alternative. Charlie has a lot to answer for.
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