Prudential Works Pension ?

Pal

So lets summarise:

- You mentioned SIPPS and income drawdown in response to a post where you knew it was not relevant to the original poster, just in order to avoid a "misselling" case?
- You mentioned income drawdown knowing nothing about the original posters circumstances, investment education or attitude to risk?
- When you said "Alternatively you can transfer the remainder into an income drawdown scheme " you were actually talking to people other than the original poster given that you comment was likely to be irrelevent to them?

Sounds like potential misselling to me!

Please stop spamming the boards, and try to stick to the original subject of the thread.

complusory annuities will be dropped

Says who? The regulations have not been produced yet, and you have no idea what anti-avoidance mechanisms are going to be introduced.

It's not hard to see that this could become a trend, because when they think about it, people get very annoyed at the idea of giving all their hard-earned away to an insurance company.

Annuities are risk pooling. People do not object to paying insurance for their house contents. Why should they object to using their pension pot as an insurance premium against their living longer than average? I know lots of people who have bought annuities and very few of them object to doing so. Those that did have transferred to personal pensions to carry out drawdown.

If someone is worried about their not living long in retirement, buy a contingent spouse's pension or a 10 year guarantee. Buy an inflation linked pension annuity to protect against inflation.

Personally I would rather have a secure income in retirement with suitable guarantees and no worries than have to take more investment risk while receiving a potentially lower annual income through a drawdown arrangement, with the possibility that I might end up in poverty if I live too long or get my investment choices wrong.

oceanblue_3

You're right, Pal.

When Edinvestor says....

"Alternatively you can transfer the remainder into an income drawdown scheme which will allow the fund to keep growing while you take an income and enable you to retain control of the capital and leave it to your heirs."....

there is a degree of certainty in her tone which could lead the unwary to believe that drawdown has no pitfalls. This is in marked contrast to what the regulator says in Regulatory Update 55.............

"3.2 The risk factors
The risk factors which need to be taken into account include the fact that:

• high income withdrawals may not be sustainable during the deferral period

• taking withdrawals may erode the capital value of the fund, especially if investment returns are poor and a high level of income is being taken. This could result in a lower income when the annuity is eventually purchased

• the investment returns may be less than those shown in the illustrations

• annuity rates may be at a worse level when purchase annuity takes place."

I know that you have alluded in the past to the degree of credence which posters should afford Edinvestor. I think that this example of her reckless attitude towards potential risk should make posters even more wary.

EdInvestor

Pal wrote:

Personally I would rather have a secure income in retirement with suitable guarantees and no worries than have to take more investment risk while receiving a potentially lower annual income through a drawdown arrangement, with the possibility that I might end up in poverty if I live too long or get my investment choices wrong.

I couldn't agree more,Pal. But what are people to do, given what has happened to annuity rates, combined with the stockmarket collapse? In some cases people's pension pot has almost halved in size and the annuity rate has gone from nearly 10% to less than 5% in 10 years.

This is a double whammy - in the worst scenario, an individual might be facing retirement with an income of something like a quarter of what he thought he had saved for a few years ago. Is he just supposed to accept this dire situation - and then watch the mini income further diminish because of inflation?

All I'm saying is that there is an alternative which may be worth trying out because it offers the opportunity that your fund could grow.Of course there is the risk that the opposite could happen, as you say, so you need to pay attention to the fund's performance and how it is invested.

I don't really understand why you think it's such a dreadful thing to point this out. IMHO we need to be realistic: many people have a real problem getting enough pension income for the reasons I mention above.Burying heads in the sand doesn't help.

Pal

EdInvestor wrote:

I couldn't agree more,Pal. But what are people to do, given what has happened to annuity rates, combined with the stockmarket collapse? In some cases people's pension pot has almost halved in size and the annuity rate has gone from nearly 10% to less than 5% in 10 years.

Reduced annuity rates are only relevant for people retiring now, and they have to be seen in the context of current investment returns, particularly the yield on bonds. Comparing annuity rates now to annuity rates 10 years ago is as pointless as comparing the lottery numbers you chose with those that actually came up on Saturday.

In addition, the fact that annuity rates are low NOW does not mean that they will be low in 5, 10, 15, 20, 50 years time. They might be even better than they were 10 years ago, and so for younger people saving now worrying about annuity rates is pointless.

Similarly, anyone who was invested in the stock market immediately before their retirement made a bad investment choice. I would suggest that the last people who have done this need to be looking into is income drawdown where they continue to choose their investments!

For everyone else with more than 10 years to go to retirement, the stock market crash was a buying opportunity that they can hopefully profit from when they eventually retire.

This is a double whammy - in the worst scenario, an individual might be facing retirement with an income of something like a quarter of what he thought he had saved for a few years ago.

Ah, the joy of stock market investments. They can go up as well as down you know? This is not something that anyone could have done anything about apart from invest in something less risky if they are close to retirement, such as bonds or dare I say it a with-profits fund. But again, projections are only projections - they are never accurate. Someone in this position who finds that they cannot afford to retire has a number of options, including not retiring, or taking income drawdown in the hope of making themselves better off. But as I said above, someone who was invested in the stock market just prior to their retirement probably isn't investment savvy enough for income drawdown.

Is he just supposed to accept this dire situation - and then watch the mini income further diminish because of inflation?

When are you going to get the idea of index linked annuities through your head, or do we have to repeat it on every thread that you contribute to?

All I'm saying is that there is an alternative which may be worth trying out because it offers the opportunity that your fund could grow.Of course there is the risk that the opposite could happen, as you say, so you need to pay attention to the fund's performance and how it is invested.

The problem is not you mentioning the option, but that you never mention the many downsides, which makes your posts look more like an advert for your website than a sensible attempt to help people.

I don't really understand why you think it's such a dreadful thing to point this out. IMHO we need to be realistic: many people have a real problem getting enough pension income for the reasons I mention above.Burying heads in the sand doesn't help.

Indeed. But you pointed out income drawdown when it is almost certainly inappropriate. The OP almost certainly has a very small fund value, too small to make a SIPP worthwhile, and yet you immediately launch into the SIPP and Drawdown mantra without mentioning more obvious answers to their question - trivial commutation and immediate retirement- or asking any obvious questions - How old are they are and what is the fund value?