Makes you think

Paul_Herring

EdInvestor wrote: »

It wouldn't but hardly anyone buys them because the starting income is so much lower than the level rate.So it's hardly a factor.

And of course, inflation will never rise above 3%, and it's impossible to buy anything other than /just/ one of a fixed term or index linked pension. :rolleyes:

Paul_Herring

On a more topic related note, Fool have picked up on this and have given it a different spin to the Mail: Poorer Postcodes To Get Better Pensions

Fool wrote:

People in poorer areas don't tend to live as long, so the plan is to pay them a slightly higher pension to compensate for this. While the pilot is taking place (it's due to run for a couple of months) people in wealthier postcodes won't be affected and won't be offered lower pensions. But should the practice become formally adopted then wealthier pensioners are likely see their pension rates reduced to fund the higher payments being made elsewhere.
[...]
As you might expect, there have been some hysterical reactions in corners of the press, highlighting this as an attack on the middle classes. But I think it's more realistic to see this as redressing an imbalance that has benefitted wealthier pensioners in the past.

EdInvestor

As you might expect, there have been some hysterical reactions in corners of the press, highlighting this as an attack on the middle classes. But I think it's more realistic to see this as redressing an imbalance that has benefitted wealthier pensioners in the past.

And with one mighty blow, the founding principle of annuities - that the profits from those who die young fund the payouts to those who live a long time - is consigned to oblivion. Is it good riddance or RIP?

Whatever next. Soon they'll be charging well-off people fees to run their bank accounts instead of taking their profits off people who are constantly running up unauthorised overdrafts.;)

purch

the founding principle of annuities - that the profits from those who die young fund the payouts to those who live a long time

Robbing Peter to pay Paul

Not only do you have the tragedy of someone dying young, but they also have all their hard earned and saved money STOLEN from them to give to those who did not save enough to fund their retirement throughout their long life................

DavidLaGuardia

purch wrote: »

Robbing Peter to pay Paul

Not only do you have the tragedy of someone dying young, but they also have all their hard earned and saved money STOLEN from them to give to those who did not save enough to fund their retirement throughout their long life................

This is the risk that is taken in order to GUARANTEE a higher income. The gamble is clearly explained.
The alternative is that you use capital and income from the fund to live off which, baed on a fixed rate of income) means it will run out at some point
It is impossible to know how long you are going to live so you guarantee the income thrugh this type of cross subsidy.
If you have a shortened life expectancy through smoking or il health or even post code than there is the opportunity to have a fairer deal by joining an annuity population that reflects this and pays a higher amount
The level of annuities is partly to do with a low interest environemnt since they are based on Gilts. Using an annuity with an alternative type of investment governing returns may well be worth considering.

Since oocupation is also a consideration the best pensions advice might be 6 month before retirement to take a job as a caretaker in Oldham and smoke 20 Bensons a day

EdInvestor

DavidLaGuardia wrote: »

Since oocupation is also a consideration the best pensions advice might be 6 month before retirement to take a job as a caretaker in Oldham and smoke 20 Bensons a day

Having first evicted your tenants and moved into your northern higher yield BTL, so as to claim PPR and letting relief on your capital gains tax bill when you sell. :D