EDITOR'S LETTERMerryn Somerset Webb
Pensions: good news at last
Here’s an interesting statistic. According to Fidelity, annuity sales are down 50% this year. You might think this isn’t that surprising. After all, we heard in the last budget that there were to be huge changes to the pension system. And a paper this week from the new financial secretary to the Treasury, David Gauke – Freedom and Choice in Pensions – effectively called time on the old annuity system in the UK. From next year, everyone should be able to withdraw money from their pension after the age of 55 as and when they like (subject to income tax on anything beyond the first 25%).
But to me, the surprise isn’t that the numbers have fallen – it is how little they have fallen. Given what bad value annuities are today, and that a world of pension possibilities is opening up, what on earth are those buying annuities thinking? More importantly, what are the people selling them these annuities thinking? I won’t follow this train of thought too far – just to note that these sales of high-margin but not-very-suitable products inside a last-ditch time frame are mildly reminiscent of the jump in high-commission products sold to unsuspecting investors just before the Retail Distribution Review (which banned commission payments) was introduced. That’s all.
On to happier thoughts. We have always loathed the annuity system, so the fact that the government now seems to believe that most of us, with a bit of state-sponsored guidance, are capable of figuring out our own finances in retirement, is good news.
• Read the full editor’s letter here: Pensions: good news at last