MSE News: 'Beware annuity purchase delay', as pension income drops

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"The cash pensioners get is falling. Bob Bullivant, from Annuity Direct, thinks matters could get worse ..."

Read the full story:
'Beware annuity purchase delay', as pension income drops

oldvicar

Gloomy prospects for pension annuities, and it is difficult to disagree with views expressed in this advertisement/news article.

Once again it seems that pension prospects are being spoiled by quasi-government actions: Not a Gordon Brown style raid on pension pots but in this case regulations of Solvency2 (European Union) and Quantitative Easing reducing Gilt yields (the independent Bank of England).

gadgetmind

What's savage is that even those who use drawdown, and hold underlying investments that have historically shown that they out-perform gilts, will be limited by the 100% GAD rules to drawdowns based on 15 year gilts.

I hope the rules on flexible drawdown get a bit more flexible in the future!

jamesd

What a big surprise, an annuity vendor writing under a headline "beware" about delaying purchasing one which would mean a drop in their short term income from sales.

The claim that drawdown leaves you at the mercy of the markets is false and presumably intended to mislead people who think that markets have to mean shares. It can do that but the money can also be put into cash savings accounts complete with FSCS guarantee or money market funds, neither of which has any significant risk, the savings accounts as risky as any other money in a savings account outside a pension pot.

It's a nice bit of scaremongering to discourage people from doing the sensible thing: deferring while exceptional economic conditions make annuities a particularly bad deal.

dunstonh

What a big surprise, an annuity vendor writing under a headline "beware" about delaying purchasing one which would mean a drop in their short term income from sales.

I typed something similar but deleted it because I thought I wasnt the one to say it. The article reminds me of something you see in the papers very often nowadays where they invite a advertiser or sponsored article writer to write a piece and then it is presented as news.

The claim that drawdown leaves you at the mercy of the markets is false and presumably intended to mislead people who think that markets have to mean shares.

If you are looking to just beat annuity rates or provide something similar then you dont need full market exposure. Consumers read market as stockmarket even if the article perhaps, if I am being generous, didnt mean that.

DavidLaGuardia

A far from balanced anaticle from a promoter of annuities. Shame on MSE for this one!

There are several factors that need to be considered. The biggest thing in favour of drawdown is to get a better long term return than a converntional annuity provides whereas the biggest thing in favour of annuities is the cross subsidy that gives a return to survivors from people who die earlier. The latter gets more relevant as you get older but then other factors such as death benefits may also be important.

The increase in longevity may also be overeaggerated. In recent decades affluence, lifestyle and a decline in smoking have been massive factors. Medical science advances but the rate of increase may not be as dramatic in the coming decades. Rising obesity may even have a slight counter effect!