@Chagsy it’s a while since we looked at this for my wife for her QSuper account when we retired and converted to pension stream (she is now 64 years old). We had a free consult with someone from QSuper. From memory the longer you live the better the deal you get. On the flip side, if you pass early in life, your family will only get back what you put in less what they’ve paid out to you (from memory). We decided against it because your account is whittling down straight away, whereas our current super is growing as we withdraw. I haven’t gone into putting into an annuity at a later stage in life. It might be worth getting some professional advice on.

@Chagsy I’ve just realised I’m probably talking about a different product offered by QSuper called a “Lifetime Pension”. It’s different to an annuity. More info here: https://qsuper.qld.gov.au/news-hub/articles/2021/04/01/03/09/what-you-need-to-know-about-lifetime-pension#:~:text=The%20Lifetime%20Pension%20is%20able,provide%20lower%20rates%20of%20income.

That sounds eminently sensible @RhinoInvestor

Annuities have largely fallen out of favour, and potentially with good reason (as your personal case demonstrates).

After my recent research, I think they probably do have a place but not for everyone. If you have a relatively low balance and are really going to have a significant reduction in your annual drawdown if you have the bad luck to retire just before a GFC-like event, they can add certainty against this sequencing risk.

Secondly, as outlined, later in life they can provide a good hedge against longevity risk.

Other than that there isn't too much benefit, other than security of income.

Morning star are running a decent set of seminars atm. You can access them free on yourtube: https://www.youtube.com/user/morningstaraus/videos

They also offer some really useful spreadsheets to aid modelling which I think you can also access for free, see show notes in the above.

I am s subscriber and have downloaded, so if you can't access them and are interested, just PM me and I can forward them thru to you.

Same goes for anyone else who is would like a copy.

Best wishes

C

Thanks @Rick

I am also with Qsuper so was intrigued by that product. As your subsequent post clarifies: these are different products. By being in a Balanced fund with a fixed draw down (Lifetime Pension) you are still very much exposed to a sequencing risk. As I have previously outlined, this doesn't matter if you don't need to keep drawing down on these assets to fund essentials and can wait for the market to recover. If you HAVE to draw down on those assets then this sort of product will create a significant dent in your total asset base, hence reducing your pool for future income. Having a cash buffer that covers several years of essential outgoings will negate this risk. If this is you, then an annuity is not of value in early retirement. It may be of value late retirement - hence the "age 73" discussion - if your expected drawdown rate will not cover outgoings if you unexpectedly live to 103 and require 7 years of very expensive high care nursing home fees.

For others that want to leave an inheritance (or cover future ongoing expenses eg @RhinoInvestor) having a significant percentage in growth assets is, of course, essential.

Not all annuities are created equal. The challenger group offer a huge range of options and are probably the biggest provider of annuities. One other thing to consider is that if the annuity provider goes bust, well, you can be in trouble.

Sorry to discuss financial products and retirement investing options in a small cap space, but it was something I wasn't aware of, might be of interest for some people, and was of significant import to my immediate financial plans. To all the others; your time will come!

@Chagsy I also had a cursory look at Annuities in the past year or so (likely for much the same reasons as you - considering retirement). Like you I came to the conclusion that it offers more benefits to those with lower balances and I think here in Australia specifically in the case of those also having access to and using the aged pension as part of their income plan (because of the beneficial treatment of the value of the annuity for aged pension asset test purposes - i.e. it can make it easier to meet the tests to get the pension)

One way I was thinking of these being useful in general is for those using a bucketing style approach in retirement - e.g. one bucket with growth assets (which you basically leave growing and only sell down to refill the cash bucket during "the good times") and one with stable cash and cashlike assets which you draw down your income/spending from (so that you're not a forced seller). I can see a scenario where some part of this cashlike bucket is made up with annuities and/or things like that. I read recently of someone using the Hostplus CPIPlus product in a way that reminds me of this strategy (the CPIplus product seems to me to be annuity like)

My Super fund also has annuity options (basically Challenger underneath) and I went to one of my funds seminars on this. There seemed to be quite a lot of different options to the annuities as well - like the standard CPI linked, but also RBA cash rate linked, various market index linked, etc and also things like ability to withdraw for a time, death benefit, etc - so they appear not to be as rigid as they used to be and are a lot more flexible these days

There are also some online retirement calculators that can take these into consideration of one wants to model them out