‘Toxic’ pension system deprives retirees of 30% of income

Oh so what is new. Everybody from the Goverment down has been lining up to screw the private pension sector. Robert maxwell was villified for helping himself but all he did was set the stage for a raft of others to prey on the sensible responsible savers who dont want to be a burden on the State in their retirement.

IFA,s go for incombe drawdown to earn extra fees or commision

Michael Stevens

"IFA,s go for incombe drawdown to earn extra fees or commision"

Is this statement based on any factual evidence?

This is a prime example of the regulator's total failure to act in consumers' best interests. Everyone has known about the charges and annuity rip off for decades and the regulator has totally failed to do anything to prevent this situation from worsening. Indeed, although annuity rates are set with reference to gilt yields, most annuity funds are actually heavily invested in good quality corporate bonds which show a much higher yield than gilts - so the rip-off is even worse than it appears. The regulator must intervene now.

Just a note to point out that most "Trust Based" pensions seek the best "Average" provider they can find to provide the retirement quote but will obviously NOT be the best fit for all. As occupational schemes have their hands tied by regulation in terms of what they can say the closest they can come to giving advice is to suggest to members that they consult an IFA before "buying" their pension. It therefore falls back to the Regulator to provide a more open framework for annuity quotes.

Even the current GPP offerings give a similar guide when providing a quote. As it stands that's the best they can do.

Pensions, insurance, the markets, the banks - all geared up to part people from their money & all legitimate because no one to check that the investors are getting a good deal - the bloody system seems to be one that is set up to rip people off & any wonder the banks think it easy to rip the public off as well!

Lorna - If I can be cynical for a moment, the regulator is effectively appointed by the Government, and it is very much in the Government's interest to push annuities and sell as many gilts as possible. If the regulator attacks the annuity providers it will not help the Government, who are doing very nicely at the moment borrowing money from pensioners at miniscule rates of interest via their annuities. There will never be enough good-quality corporate bonds to meet the demand, so gilts will always be needed.

The only answer is to educate those about to retire, and to get them all to draw down pension instead of buying annuities.

The best annuity rate I can get at my age is 5.2%. I can get that return from the dividend on Aviva shares, never mind any capital appreciation.

It would be good for "Maverick" to realise that annuity involves no risk, whereas pension drawdown involves considerable risk. One type of plan for the cautious and one type for the adventurous. Perhaps a few years ago Maverick might have invested in RBS; a company paying good dividends and producing capital appreciation. We live in a world where most people need some advice and making people aware that there are options, and that advice is available, is the first step.

From 21 Dec 2012 the European Court of Justice has ruled that Annuity providers have to ignore gender when it comes to setting rates. This probably means that it will only get worse for most men but I doubt that women will see much benefit.

I hope we will see in the very near future some new imaginative retirement income options from the industry or the future looks bleak even for those who have taken steps to provide for their retirement.

The newish Flexible draw-down looks like a good start but will be available to very few because of the £20K guaranteed income level hurdle.

James Kane - Annuities only involve "no risk" while the insurer remains in good health. Anyone who put their pension savings in Equitable Life (fortunately I didn't) will not have much faith in insurers. And the insurers may be in good health now, but who knows how healthy they will be in 15 or 20 years' time . . . . .

My jaundiced view of advisers (and IFAs in particular) does result from 20 years as a pensions lawyer. No amount of taking advice will get me a better annuity rate than 5.2%. At the moment my SIPP is showing an 8% rise over the last year, including the big dip. I'll take my chances, thanks.

RBS? Look at its 3-year and 5-year graphs - is that what you call capital appreciation? Then look at the same periods for Weir Group.

I've said it on this site before - pensions are a failed financial model because the financial services industry works like a plague of leeches on the savings pot.

When a person retires the entire savings pot should be available to them to do whatever they like with. Let them pay the tax due on the interest earned but the rest is THEIR savings. It should never be put under the control of any profit-making self-serving financial organisation. This is tantamount to saying to every retired person that their financial situation will be controlled under a Lasting Power of Attorney over whom they will have no future control.

It is a form of State Robbery carefully disguised as a public service administered by its "supporters" who claim to be acting in the best interests of the population. It cannot last - and it must not.

Consider this. The best annuity rate for a healthy 65 year old male is just under 6%. The actuarial life span of same 65 year old is just over 17yrs. 17 yrs at 6% per annum is about 100%. You have to live at least to your actuaria lor average lifespan just to get your own money back. What happens to ithe interest, dividends etc during that 17 years? Goes to the pension provider. If you live longer, this is funded by those who did not. All annuities are a bad deal.

Further to my earlier comment, I forgot to add that the government then takes 20% tax off you to get its tax "relief" back. You therfor have to live at least 32 years just to get your money back.

Dr Jimbo.

Although I agree that the Annuity system needs an overall remember that

1. No one makes people save in a pension scheme. If you don't like it use another method to save so you don't have to buy an annuity.

2. If the majority of the population had access to this pot at retirement how long do you really think the money would last in the real world?

The annuity system is enforced fiscal discipline but at an unacceptable price.

Dek you are wrong.

Everyone will be auto-enrolled into a pension scheme under the new rules and in any event they have to pay National Insurance which provides their State Pension.

See the article referred to above in full at

http://www.ft.com/cms/s/0/86b047be-4b3f-11e1-a325-00144feabdc0.html#axzz1lha4cY4r

It says the pensions industry is on the brink of failure and a particularly telling paragraph illustrates this by saying the pensioner is expected to select a lon-term retail isurance product - the annuity - without any expertise in a process that requires above-average litteracy, numeracy and understanding of inflation and morbidity.

Rip-off financial services again!

Hi Dr Jimbo.

Auto Enrolment is NOT compultion. You can opt-out. This is nothing to do with State Pension so I don't see what impact having to pay National Insurance has on the poor value of the market when purchasing an annuity from private pension savings. There is no longer the option from April for future savings on S2P as you will no longer be able to opt-out into a private arrangement.

I have already agreed that the annuity market is imperfect and needs the Regulator(s) to address the current practices.

Sorry all. I can't seem to spell compulsion.

Dek and Jimbo - Contrary to what a large number of people still say, it has not been necessary to buy an annuity since 2006. If you bad-mouth pensions you risk losing a lot of tax benefits - e.g. you have to contribute to an ISA from taxed money, whereas the pension contributions are taken off your income before it is taxed and so get your highest rate of tax relief.

Maverick.

Fully aware of this but that wasn't the issue. The issue was that where the annuity is bought there are a lot of people out there who don't understand the options available to them when they do buy an annuity.

Also agree with the Tax advantages (to say nothing about the employer contributions where available). I for one am NOT "bad-mouthing" pension but let’s call a spade a spade. The annuity process for most pension savers does not lead them to the optimum solution for their personal circumstances.

when I ask ATS to spell it out for me they point me to the Pamphlet and say work it out yourself.Help.