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MSE News: 'Murky' pension practices to be tackled
Former_MSE_Helen
Former MSE 2.4K Posts
"Retired workers will be able to 'shop around' for new annuity schemes, pensions minister Steve Webb has said..."
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'Murky' pension practices to be tackled
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'Murky' pension practices to be tackled
Click reply below to discuss. If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide.
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The problem isn't that annuities are a grand opportunity to fleece those who invested in them, it's a robbers charter because you are denied the chance to take all your pension as a lump sum.
It isn't allowed because politicians suck up to the financial institutions to make sure they get lucrative consultancies with them after parliament.
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A cynic might suggest that he is looking to score some cheap political points. Either that, or we have a pensions minister who doesn't understand the rules applying to pensions.
Fixed Term "annuities" (written under drawdown rules) allow people to take an income without committing to an annuity. You can buy an annuity at any time or put the maturity sum into another Fixed Term product.
There is also nothing in HMRC rules preventing temporary annuities being set under annuity rules. There is a "Third Way" product out there that broadly works in this way.
The problem with these products is that few people are aware of them, and the figures are often not very competitive (probably because of the lack of volume in the market).
If the government was serious about making things better for people, they would make whole of market shopping around mandatory and reform the Money Advice Service to assist with the flow of information.
The clue is in the name pension.
pen·sion 1 (pnshn)
n.
A sum of money paid regularly as a retirement benefit or by way of patronage.
If you get all the money in a lump sum, it's not a regular payment.
If you were not coerced in to buying what is currently available, then you would have a whole raft of options available to provide for retirement, including annuities.
Removing the coercion would mean more competition for pension pots and would, I believe, give bigger payouts.
What happened to the right to make your own decisions.
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then don't save in a pension, use an ISA instead. The (semi-)mandatory use of annuities is the price you pay for tax relief on the way in, 25% tax free on the way out and protection from bankruptcy/means-testing
'the price you pay' never emphasises the fees and charges from management and finacial advisors. Both of whom know how much 'free money' is available to point in their direction.
Those shopping around for what to do with their pension pot now did not have the option of ISA's when starting out.
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Pension contributions are (and have been) subject to a preferential tax regime on the basis the contributor won't then be reliant on state handouts in their old age (or with only small contributions, less reliant). Allow anyone and everyone to take their 'pension' in one go, and you allow them to squander it, defeating the original purpose.
So... you would have the state attempt to fix prices? Or what?
By opening up the options and the competition, prices would more than likely trend down.
As to claiming that those given control of their pension pot would squander it, after saving in to it for most of their working lives.......please.
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Please provide an example of this fleecing?
And what options and competition doesnt already exist?
There are flaws with the suggestions (they are not even proposals yet). Lifetime annuities benefit from mortality gain. Fixed term annuities get barely any mortality gain. The Consumer Panel itself has made the point that there is now a variety of options available and its main concern is that professional advice was harder to find. I personally dont agree with that. Advice is not difficult to find. The problem is that providers tend to prefer to sell their in-house option and are only required to mention what their options are and that the OMO exists.