Don't fall for the latest pensions rip-off
The financial industry has taken advantage of the new pensions rules to come up with yet another rip-off product.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Twice daily
MoneyWeek
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Four times a week
Look After My Bills
Sign up to our free money-saving newsletter, filled with the latest news and expert advice to help you find the best tips and deals for managing your bills. Start saving today!
When the new pension rules were announced in George Osborne's Budget, we were, like everyone else, pretty impressed.
However, we also noted that this would give the financial industry the perfect opportunity to show us, yet again, that there is nothing for which they cannot find an expensive and complicated solution. They've taken that opportunity already.
Given that the rules on annuities and drawdown change from next April (allowing everyone to effectively enter flexible drawdown), it doesn't make sense for those retiring today to buy annuities as they might have in the past.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
It makes sense, instead, for them to either defer taking their pension or to simply enter some kind of drawdown now and just spend the cash they need for the year.
However, that hasn't stopped the introduction of 'stopgap' annuities ones that either expire after a year or come with a 'surrender clause' built in. Providers say that this gives flexibility ahead of the reforms, but, says the FT, "concerns have been raised about the cost and complexity of these products".
The Financial Services Consumer Panel has raised concerns about the commissions 1.5% to 2% of the customer's pension upfront and more on surrender and others have mentioned the shocking rates on offer.
Pensions expert Ros Altman notes that the offerings from LV= and Just Retirement offer effective rates of just 0.5%. This is, as she says, "awful value".
The good news here is that many institutions aren't offering these products. The disappointing, but entirely expected news is that names that should be perfectly respectable are offering them.
We can only hope that an increasingly financially educated pensioner population doesn't fall for it.
-
Average UK house price reaches £300,000 for first time, Halifax saysWhile the average house price has topped £300k, regional disparities still remain, Halifax finds.
-
Barings Emerging Europe trust bounces back from Russia woesBarings Emerging Europe trust has added the Middle East and Africa to its mandate, delivering a strong recovery, says Max King
-
Our pension system, little-changed since Roman times, needs updatingOpinion The Romans introduced pensions, and we still have a similar system now. But there is one vital difference between Roman times and now that means the system needs updating, says Merryn Somerset Webb.
-
We’re doing well on pensions – but we still need to do betterOpinion Pensions auto-enrolment has vastly increased the number of people in the UK with retirement savings. But we’re still not engaged enough, says Merryn Somerset Webb.
-
Older people may own their own home, but the young have better pensionsOpinion UK house prices mean owning a home remains a pipe dream for many young people, but they should have a comfortable retirement, says Merryn Somerset Webb.
-
How to avoid a miserable retirementOpinion The trouble with the UK’s private pension system, says Merryn Somerset Webb, is that it leaves most of us at the mercy of the markets. And the outlook for the markets is miserable.
-
Young investors could bet on NFTs over traditional investmentsOpinion The first batch of child trust funds and Junior Isas are maturing. But young investors could be tempted to bet their proceeds on digital baubles such as NFTs rather than rolling their money over into traditional investments
-
Negative interest rates and the end of free bank accountsOpinion Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK banking system slightly less awful, says Merryn Somerset Webb.
-
Pandemics, politicians and gold-plated pensionsAdvice As more and more people lose their jobs to the pandemic and the lockdowns imposed to deal with it, there’s one bunch of people who won’t have to worry about their future: politicians, with their generous defined-benefits pensions.
-
How the stamp duty holiday is pushing up house pricesOpinion Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb.
