Academics advise not to use annuities for pension

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Academics advise not to use annuities for pension

Annuitising at retirement is not the best option, and most people would be better off drawing down money from their pension pot when they retire, academics have claimed.

This is the conclusion of research on the best approach to handling a pension pot by the Cass Faculty of Actuarial Science at Cass Business School, City University, for the International Longevity Centre.

Les Mayhew, lead author of the 32-page paper, Pension Pots and How to Survive Them, and professor of statistics at Cass, said: “The new freedoms are exciting, but need not be especially risky. If simple rules are followed then people should benefit from the greater flexibility.”

The research claimed that with careful management, moderate-sized pension pots of £100,000 or more should not run out until at least the age of 80 or older.

Adviser view

Scott Gallacher, chartered financial planner at Leicester-based IFA Rowley Turton, said: “An annuity is not an investment. It is insurance against someone living too long.

“In all of my financial planning, the first thing we do is to ask if you bought an annuity would you be okay? Also, there is the reassuring certainty of cash being paid in your bank account on a regular basis until you die.”