David Dunn gives his opinion of variable annuity products and discusses whether the guarantee represents good value for money
Prospect theory demonstrates that we are by nature risk averse. If offered the chance to win £1000 or lose £1000 very few people appear willing to take the bet. The upside needs to move to around £2500 to attract a reasonable number of takers. This predilection to minimise risk becomes more pronounced in retirement. Studies attribute this to retirement as a life stage. Intuitively this feels right: We no longer have the cushion of a regular salary each month, our savings may have taken many years to build (there is a correlation between the effort taken to create wealth and the risks we a...
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