Cash creation clobbers annuities

BlondeHeadOn

More bad news for pensioners, caused by QE? ...

http://news.bbc.co.uk/1/hi/business/7932269.stm

"Annuities for people retiring in the UK will plunge in value after the injection of £75bn into the economy by the Bank of England, experts say.

Insurance companies pay out annuities - a regular income from a retiree's pension pot - based on the yields made from government bonds or gilts.
These yields have dipped dramatically after the Bank said on Thursday it was creating £75bn to buy these gilts. People about to retire have been urged to shop around for the best annuity.


"Annuity rates have been falling quite substantially in the last four or five months," said Nigel Callaghan, a pensions expert at Hargreaves Lansdown.
"However the £75bn, which is a huge sum of money, is only going to add to the retiring investors' woes."
He suggested that people preparing to retire soon should shop around for their annuity, or considering splitting up their pension pot and spending some of it now and some later on annuities. People can buy an annuity up to the age of 75.
He expected annuity rates to fall further in the coming months.
Easing deal This trend could continue given the possibility of more money injections in the future. While the Bank will initially add £75bn, Chancellor Alistair Darling has given it permission to extend this to up to £150bn. "

thriftybabe

We have made a conscious decision NOT to put into our pension this year due to the volatility of the markets. It is really sad for pensioners who have worked hard and put away money to see it all go down the drain!

Obukit

thriftybabe wrote: »

We have made a conscious decision NOT to put into our pension this year due to the volatility of the markets. It is really sad for pensioners who have worked hard and put away money to see it all go down the drain!

It's a bit crazy to stop paying when stock markets are low - in the end they will recover and it's stocks you buy when the markets are down that are the ones that make the most profit. With long term investments like pensions short and medium term fluctuations don't matter unless you're planning on withdrawing your pension soon (or unless you believe those who think we're heading for meltdown and will be living in caves and eating each other next year...).

What you're doing is buying stocks when they're at their most expensive last year, and now they have halved in price declining from buying them...

Arcaine

Well I am 33, about 32 years or so until retirement and I am going to keep my pension payments the same, I may even increase them in the Summer. I have a personal pension but my company pays into it as well. It is worth about 25% less than the total money I and the company have put in! But I realise that it is buying into a fund and while the unit price is lower I should be buying more for when a recovery does happen. I have increased the payments into my sons child trust fund on the same prinicle too as it will be another 14 years before he sees is so hopefully we will have recovered by then.I do realise that all of this is a little dependent on my job of course!