Wow - Pension revolution - Budget

actually that story has been superseded by the budget announcement

 

No, it used to be a 55% tax charge if you wanted to take out your whole pot in cash, now you still pay tax but it's only at the marginal rate. So if you take out less than £10k, there's no tax, £10k-£40k will be 20% tax, £40k-£150k will be 40% tax and above that will be 45% tax.

Invest in a guaranteed-money-can-never-drop savings account and you will get something like 3% if you're lucky. This is not enough of a return to be able to keep all your capital on death i.e. you will probably use more than 3% a year in income. You could invest it in something more risky if you like but then you have all the inherent investment risk that this brings, and which an annuity doesn't. And, as noted above, you will still pay tax if you take it all out. You could leave it in a drawdown fund, but then your fund is still taxed when you die if you want to give it to your family as cash.

That nasty taxman will get you either way!

Ultimately, we clearly see annuities differently. Whether they are "value for money" or not depends entirely on an individual's attitude to risk, I believe that there are people out there with a risk profile and a fund size for which an annuity would be suitable, and you don't. That's fine, and the beauty of our market system is that providers can offer products and then customers get to choose what they see as the best value for their money. So we will see in a few years whether annuities are valuable to customers or not

 

Not sure you really get it: handing over £500k to an insurance company in return for £20-30k a year - which stops when you die - is clearly a poor deal to people

 

to SOME people. It's a fantastic deal if you happen to live to 90, when your 35 years of payments at £500k will total over £1m. If annuities are such a bad deal, why do financial advisers recommend them time and time again.

It's definitely a better deal for many people than taking all of your money out (and losing 45% of it in tax) to invest it in ONE ASSET (talk about being diversified) which will have an uncertain future income stream, all so that you can give your kids something when you die.

You know what most people leave their kids when they die? The actual house they live in. They don't worry about leaving a second house as well, one is usually plenty. That's what you don't get, you keep talking about what people leave behind when they die, but normally that's nothing to do with your pension, a pension is designed to be for income in retirement, it's not primarily an inheritance vehicle.

 

I'm struggling to see which people would benefit from annuities, they're poor for everyone.

Like it or not, people trust property and they can house their family in it too. They don't trust banks or insurance companies anymore like they used to.

Remember that people who are cashing in a pension now have suffered years of poor bonuses on their with-profits, maybe their WP endowments didn't pay off their mortgage. They are ANGRY and would rather DIY than hand over such a huge sum to insurance companies.

I don't know what you're thinking here. No smart person wants to leave a huge payoff to politicians or financiers when they die.

 

Just because they don't trust insurers, and they are angry, doesn't mean the resulting decision is the right one.

And just because you struggle to see who would benefit from annuities, doesn't mean nobody can benefit. Financial advisers are far more qualified to make those judgements than you, and advise customers to take annuities regularly.

You clearly have no idea what you're talking about, and trying to convince you is like talking to a wall. I'm done.

 

Why are you being insulting, you have no idea of my qualifications to comment on these topics. Capital going to insurer not your family when you die is a big turn off to people.

 

You insulted me too, I was returning the favour

 

No matter anyone's opinions, the market has spoken as share prices tumbled on this news.

 

And yet companies which sell nothing but annuities still have a share price, they haven't all gone bust on the news. Could that possibly be because the market still thinks there's some value in annuities?

 

Well I guess the ones already sold that are conning people will keep bringing some nice cash in

 

This is a really stupid comment. It doesn't matter who you believe, you're still subject to the same mortality experience as everyone else (subject to second order handwaving). If you retire at 65, your total expectation of life is now something like 28 years, more if you're in good health. These are questions of fact, not belief.

The classic mistake is to think the best rental returns are where the property prices are highest. In fact there are areas of the UK where you can buy property for £10-20k and make rental returns of 10-30%. None of these are in London!

Most likely not, as they would have had to sell it to fund the 2-3 years of long term care that most people now require at end of life.

Not after marginal tax charges.

Can you present any evidence you have that annuity rates are a con, as opposed to being down to low investment yields and longevity? Because from where I'm sitting, you're making allegations that are quite wrong.

 

No you're wrong. Life expectancy varies depending on WHERE YOU LIVE in the country. It's less up north, Wales, Scotland... seriously, ask 65 years olds if they think they'll get to 90, I bet most would say no, based on their own hunch and experience of others in their family

 

If you're smart you transfer your assets to kids at least 7 years before care home so that the state can't liquidise the home.

 

Various press exposes and the share price dropping upon the "no one has to buy an annuity" announcements.

It's sad to see so many actuaries suck up to corporate propagandas. All this 'fairness' talk in actuary exams, seriously look at the market and the poor rates and tell me actuaries had nothing to do with that?

 

And no matter where you live people underestimate it. That is the problem. People are not experts on longevity and are likely to get it wrong.

Or just buy a WOL policy. You still need to pay for LTC one way or another. The state isn't going to stand by and watch people transfer assets on a massive scale to get out of paying for care, and besides, state care is abominable.

That's down to an expected drop in volume. Again, price up an annuity for yourself using a current yield curve and population table.

 

Read what I said, there is, or at least was, a 7 year rule on that. Also I reject your claims about state care.

A drop in volume, yes a huge one for far too profitable products that people felt they had to buy.

 

Looks like Actuaries are experts at overestimating it if people need 25 years to get their lump sum back as regular payments.

 

Read what I said. The 7 year rule will not survive long if large scale asset transfers take place.

 

People are getting smarter and understandably don't want financiers or politicians stealing their money.

 

And politicians don't want to pay for end of life care that people can and should pay for themselves. That is hardly theft.