Fraction of financial wealth held in equities

[Lootman]

Not at all. You cannot sell it or realise its capital value. If is an annuity the capital is gone, outside your control.

Actually you can, though its extremely rare I imagine, through assignation of that income stream (and you can borrow against it too). Regardless just because you can't realise its capital value in the way you describe doesn't mean it doesn't have a wealth value. It's clear we have a different meaning of wealth in that case.

Do you literally think that wealth vanishes overnight at the point you exchange your pension pot for an annuity? That's a significant >£1m reduction in wealth for many people. I hope they are prepared!

Give that a lot of people talk about an annual drawdown of 4% from capital as being a safe withdrawal rate, can one not take the view that any income stream has a value of about 25 times the annual income created?

On that basis my current £11,000 or so annual state pension is worth about £275,000? Or a bit more given its implicit linking to inflation.

Put another way what would it cost to buy an annuity of similar value?

[SalvorHardin]

Give that a lot of people talk about an annual drawdown of 4% from capital as being a safe withdrawal rate, can one not take the view that any income stream has a value of about 25 times the annual income created?

On that basis my current £11,000 or so annual state pension is worth about £275,000? Or a bit more given its implicit linking to inflation.

Put another way what would it cost to buy an annuity of similar value?

The ONS life expectancy calculator, which uses the 2021 census data, says that the life expectancy of a 65 year old male is a further 20 years.

https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

We can avoid having to do a discounted cashflow calculation if we assume that the rate of state pension increase is about the same as the long gilt yield (IMHO that's a reasonable assumption given that current the 20 year gilt yield is 4.5% with inflation at 4.6%). As the rate of increase is about the same as the discount rate we can simply multiply the annual pension by the life expectancy.

So the capital value of the pension is 20 times the annual pension which is £11,000 x 20 = £220,000

[Dumbo]

Am I the only person on here who hasn't got the faintest idea of what this post is about or where it is going?

Aren't there supposed to be moderators who keep this sort of thing in some sort of logical order?

Best wishes,

Eddie

[CliffEdge]

Where do you live?

Essex, come find me

I have no motive to. But others might.

[Bubblesofearth]

The ONS life expectancy calculator, which uses the 2021 census data, says that the life expectancy of a 65 year old male is a further 20 years.

https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

We can avoid having to do a discounted cashflow calculation if we assume that the rate of state pension increase is about the same as the long gilt yield (IMHO that's a reasonable assumption given that current the 20 year gilt yield is 4.5% with inflation at 4.6%). As the rate of increase is about the same as the discount rate we can simply multiply the annual pension by the life expectancy.

So the capital value of the pension is 20 times the annual pension which is £11,000 x 20 = £220,000

Latest increase in state pension was 8.5%.

BoE

[vand]

So pension and property isn't "wealth", what about the examples below :

Individual 1
DB pension worth £2.5 million, Home worth £900K mortgage free, ISA 100% equities value £25K.

Individual 2
SIPP £65K, Home £150K (£100K mortgage), ISA 100% equities value £27K.

Who is the wealthiest ?

#1 has a net worth of £3.425m, invested assets of £2.525m and holds no personal debt
#2 has a net worth of £142k, invested assets of £92k and holds 100k personal debt

they both consume the implied cash stream that they house provides
clearly #1 is wealthier - they could give their home away and still be wealthier

[scotview]

#1 has a net worth of £3.425m, invested assets of £2.525m and holds no personal debt
#2 has a net worth of £142k, invested assets of £92k and holds 100k personal debt

they both consume the implied cash stream that they house provides
clearly #1 is wealthier - they could give their home away and still be wealthier

Thank you.

[elephanthunt11]

Essex, come find me

I have no motive to. But others might.

Well, that was a useful exchange.