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How much can a £100,000 pension pot get you in retirement?© GB News

A £100,000 pension pot can now secure a significantly higher retirement income through annuities compared to recent years.

Sales soared by nearly 39 per cent in 2023/24, with 82,061 annuities sold compared to 59,163 in the previous year.

Annuities, which provide a guaranteed income for life, have seen a resurgence in popularity.

However, retirees are advised to act swiftly, as these rates may decline in the coming months when the Bank of England is expected to cut interest rates.

A 65-year-old with a £100,000 pension pot can currently obtain up to £7,146 per year from a single life level annuity. This represents a substantial 43 per cent increase from just three years ago, research from Hargreaves Lansdown has shown.

Pension folder© GB News

While annuities offer attractive rates, experts caution against hasty decisions.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown explained that over 80 per cent of recent purchases were level annuities, which don’t adjust for inflation.

This could erode purchasing power over time, especially given recent inflationary pressures.

Additionally, about 66 per cent were bought on a single life basis, potentially leaving spouses without income if the annuitant dies first.

Morrissey advised: “It’s vital that you consider what you need from your retirement income and look across the market before deciding to purchase an annuity rather than taking the first or highest income offered.

“Annuity comparison tools can allow you to do this easily and effectively.”

Retirees are encouraged to carefully assess their needs and explore various options before committing to an annuity.

While annuities have gained popularity, income drawdown remains a widely chosen option for retirees. This approach offers greater flexibility but comes with its own risks.

Data shows that over 225,000 pension pots had an annual withdrawal rate exceeding eight per cent in 2023/24.

Morrissey cautioned against such high withdrawal rates and said: “There could be times during retirement when you need to take a bit more from your income to cover big expenses such as holidays, but doing it on a sustained basis can lead you to erode your savings pretty quickly and

sustained basis can lead you to erode your savings pretty quickly and leave you in trouble later on.”

She recommended a more conservative approach explaining: “As a rule of thumb, withdrawals from a drawdown pot should be around four per cent per year or in line with the natural yield on investments to remain sustainable long-term.”

When considering retirement options, it’s crucial to understand the full financial picture.

The state pension, while important, is unlikely to cover all expenses, the full new state pension pays £23,004 annually per couple.

Research from Hargreaves Lansdown showed for those aiming for a middle-range yearly spending, an additional combined pot of around £89,000 per household is needed.

The updated Watch List for DYOR. I’ve added a few ‘safer’ lower yielders for anyone who is approaching their de-accumulation stage.

Some shares are winding down, so more risky than others.

Earnings

We continued to see solid corporate earnings from the companies we invest in over the period. Whilst it was not a completely positive picture across all sectors, in aggregate the trusts’ earnings generated a total income of £28.1m. This was 1.1% above the £27.8m generated for the first half of the previous fiscal year. In terms of earnings per share (EPS), issuance of new shares over the equivalent period last year meant that the EPS reduced by 1.7% to 17.1p (2023: 17.4p).

Dividends

The positive earnings picture noted above has given the board confidence to announce an increased Merchants dividend whilst allowing us to continue rebuilding revenue reserves that were partially utilised during the pandemic. As a reminder, at the start of this financial year, revenue reserves per share stood at 18.1p. Not all trusts can or will provide such income support and smoothing, which is why Merchants is one of a handful of companies to be awarded the AIC’s coveted Dividend Hero status from a universe of well over 400 listed companies.

With the final dividend of the 2024 financial year approved by shareholders at the AGM, Merchants has raised its dividend for 42 consecutive years and, with the increased dividend noted in this report, we remain well positioned for the future.

The board has declared a second quarterly dividend for the current financial year of 7.3p per ordinary share, payable on 15 November 2024 to shareholders on the register at close of business on 11 October 2024. A Dividend Reinvestment Plan (‘DRIP’) is available for this dividend for which the relevant Election Date is 25 October 2024 and the ex-dividend date is 10 October 2024. This means that for the first half of the financial year ending January 2025, the aggregated dividend will be 14.5p compared with 14.2p for the same period last year, a 2.1% year-on-year rise.

MRCH

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Advantages of Investment Trusts in a dividend re-investment plan.

1. Revenue reserves, used to pay the dividend in time of stress e.g. The Covid Crash
2. May trade at a discount which means a bigger yield when u buy
3. Covid crash – knowing it was AIC dividend hero, u could have bought when the yield was 8% which u should receive for as long as u own the Trust.
4. Gently increasing dividends plus the chance of a capital gain.
5. If u bought around the covid crash and simply re-invested the dividends, u could take out your stake and re-invest in another high yielder, whilst earning dividends on a share that sits in your account at zero, zilch, nothing.

Some property trusts and Reits for DYOR. If u particularly like any of the above but the yield is only 6%, u could pair trade it with a higher yielder.

RECI is included although it’s a loan company the loans are secured against property, xd today for 3p.

Dividend Wealth Journal: REITs and Interest Rate Cuts, A Double Dipping Opportunity  Hey folks, over the weekend I mentioned how dividends can be great for “Double Dipping” when you play them right. In other words, buying a stock that gains value in your portfolio and collecting passive income along the way. I want to follow up with a specific opportunity that could be primed over the next few months for a double dip. With the recent talks and actions around interest rate cuts, the spotlight is once again turning towards Real Estate Investment Trusts (REITs).  Lower interest rates often breathe life into the real estate market, making REITs increasingly attractive (and potentially more profitable once again) for investors. Why do lower interest rates matter for REITs? Interest rate cuts have a direct impact on the real estate sector. Lower borrowing costs can lead to an uptick in purchasing and development activities, directly benefiting REITs that hold or manage these properties.  As financing becomes cheaper, properties in the portfolios of REITs may increase in value, and their income potential can improve due to higher occupancy rates and rising rents. The infusion of lower rates can turn the REIT market bullish in several ways: Enhanced Property Values: As more investors and businesses find it affordable to finance real estate purchases or expansions, the demand drives property values up. Increased Occupancy and Rent: Lower interest rates generally boost economic activity… This leads to higher demand for both commercial and residential real estate. This increases occupancy rates, allows for rent hikes, and boosts REITs profits.   Double Dipping Opportunity With those tailwinds giving REITs an opportunity to gain in underlying value, the next cycle of rate cuts  present a unique “double dip” opportunity.  But how?   •Dividends: REITs are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends, offering investors a steady income stream.  •Capital Appreciation: As the underlying properties appreciate in value due to increased demand and higher rental incomes, the value of the REITs themselves soar.  This scenario allows investors not only to enjoy solid dividends but also to benefit from the appreciation of the stock itself. For dividend investors looking to leverage these benefits, considering REITs in sectors that are most sensitive to interest rate changes, like residential and retail, or those focused on regions with growing economies, might be particularly lucrative for this double dipping strategy. But, as always, the key to capitalizing on these opportunities lies in choosing solid dividends, specifically ones with strong fundamentals, strategic property holdings, and a solid leadership team. As interest rates decrease over the next year and a half, the relationship between interest rates and the real estate markets will grow increasingly important.  We haven’t seen a great opportunity for real estate to gain inflows since 2020 when it took off, so now could be another double dip run. — Nate Tucci

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pttogel 
Thanks , I’ve recently been looking for information about this
subject for ages and yours is the best I’ve came upon till now.
But, what in regards to the bottom line? Are you positive concerning the supply ?

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Yes, there are currently 35 Investment Trusts paying a ‘secure’ yield above 7%, remembering that nothing is ever 100% secure.

7% re-investment is important as it doubles your income in ten years.

There is normally Trusts that the market have sold, for various reasons and u only need one to re-invest in.

The Snowball is currently not buying any new positions but re-investing in the portfolio to increase the income.

If there are no Trusts to buy at 7% or above, the current portfolio shares are trading at a blended discount of 30%, u would have funds to re-invest as well as your income. The income target is secure although u would have to extend the time line.

As the price rises the yield falls and vice versa.