Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Former MSE Helen
    • By Former MSE Helen 9th Jul 12, 4:12 PM
    • 2,324Posts
    • 971Thanks
    Former MSE Helen
    MSE News: Pensions should offer insurance, minister says
    • #1
    • 9th Jul 12, 4:12 PM
    MSE News: Pensions should offer insurance, minister says 9th Jul 12 at 4:12 PM
    "Workers should be able to protect their pensions by insuring savings against stock market falls, a minister suggests..."

Page 1
    • marlot
    • By marlot 9th Jul 12, 4:41 PM
    • 3,865 Posts
    • 2,998 Thanks
    marlot
    • #2
    • 9th Jul 12, 4:41 PM
    • #2
    • 9th Jul 12, 4:41 PM
    This is just tinkering around the edges. There was a recent report which concluded that UK pensions were expensive, and that other countries had much better models. We should be looking at those instead of adding yet another charge to our already weak private pensions estate.

    Can't find the report I was thinking of, but here's one which is similar...

    http://www.thersa.org/about-us/media/press-releases/going-dutch-how-to-double-the-value-of-british-pensions
    Last edited by marlot; 09-07-2012 at 4:50 PM.
    • dtaylor84
    • By dtaylor84 9th Jul 12, 5:11 PM
    • 635 Posts
    • 519 Thanks
    dtaylor84
    • #3
    • 9th Jul 12, 5:11 PM
    • #3
    • 9th Jul 12, 5:11 PM
    Is it just me, or does he seem to be saying he wants the industry to magic money out of thin air if pension investments fail to produce the returns desired?
    • jem16
    • By jem16 9th Jul 12, 5:12 PM
    • 18,671 Posts
    • 11,465 Thanks
    jem16
    • #4
    • 9th Jul 12, 5:12 PM
    • #4
    • 9th Jul 12, 5:12 PM
    That report was later shown to be very flawed. It was basically comparing apples with oranges.
  • FATBALLZ
    • #5
    • 9th Jul 12, 5:35 PM
    • #5
    • 9th Jul 12, 5:35 PM
    Problem: Pension returns are crap.

    Solution: Tag the cost of an insurance premium onto pension funds so that they have less capacity to not be crap.

    Try harder.
    • Butterfly Brain
    • By Butterfly Brain 9th Jul 12, 6:34 PM
    • 8,736 Posts
    • 61,001 Thanks
    Butterfly Brain
    • #6
    • 9th Jul 12, 6:34 PM
    • #6
    • 9th Jul 12, 6:34 PM
    He wants us to trust insurance companies to give us a fair deal....Don't be stupid they will want a huge cut, so pensioners will be hit yet again
    They are also fielding the idea that pensioners pay NI contributions on top of everything else
    Blessed are the cracked for they are the ones that let in the light
    C.R.A.P R.O.L.L.Z. Member #35 Butterfly Brain + OH - Foraging Fixers
    Not Buying it 2015!
    • Ectophile
    • By Ectophile 9th Jul 12, 8:38 PM
    • 3,580 Posts
    • 2,288 Thanks
    Ectophile
    • #7
    • 9th Jul 12, 8:38 PM
    • #7
    • 9th Jul 12, 8:38 PM
    Let's face it, the scheme would turn into another PPI.

    people would be encouraged to take out the insurance. But the premiums would wipe out much of the gains that the pension fund would have made, leaving people worse off.
  • jamesd
    • #8
    • 9th Jul 12, 9:08 PM
    • #8
    • 9th Jul 12, 9:08 PM
    Over 30 years the 0.75% of pension pot value a year cost is a reduction of 20% in the pension pot value, enough to cover the typical bad year drop in the FTSE index, but getting the extra money if you don't happen to buy an annuity in one of those bad years. This proposal is a guarantee of less money in exchange for protection that is of minimal value compared to the investment growth that is being sacrificed to get it.

    Better financial investigation is a more sensible approach.

    This insurance approach will be of value for those who don't understand how investments work and who don't want to learn or accept it. Shame that it'll make them poorer than they could otherwise be.

    The insurance approach could also be useful in the years prior to retirement for those who plan to buy an annuity, if they can transfer into a protected set of funds gradually in the years prior to an annuity purchase.

    So it's potentially a nice niche product for some groups for some of the time, even though it'd make most sensible people poorer for most of the time if they used it long term.
    Last edited by jamesd; 10-07-2012 at 11:08 AM.
    • gingeralan
    • By gingeralan 10th Jul 12, 10:43 AM
    • 216 Posts
    • 181 Thanks
    gingeralan
    • #9
    • 10th Jul 12, 10:43 AM
    • #9
    • 10th Jul 12, 10:43 AM
    It's one of those ideas that really doesn't need to be implemented. Work towards making final salary schemes affordable for employers and employees alike would be a much better idea.

    I have no faith in the industry to innovate for the benefit of their customers. I only contribute to my pension as it is final salary, I would not bother if this was not the case.
    • Pincher
    • By Pincher 10th Jul 12, 9:56 PM
    • 6,516 Posts
    • 2,491 Thanks
    Pincher
    Is it one of those "Your capital is 100% protected if Lehmann Brothers doesn't collapse" type insurance schemes?

    Guaranteed returns on your investment, where have I heard that one before. Some idiot is going to put it under FSA supervision, so the government will have to pay compensation when it goes bad.

    Print more money to pay the compensation, gov?
    I'll have to buy some of them special paper first, couldn't lend us a hundred thousand first, could you?
  • jamesd
    Is it one of those "Your capital is 100% protected if Lehmann Brothers doesn't collapse" type insurance schemes?
    Originally posted by Pincher
    There are several ways to do it, including:

    1. Derivatives products like those that have been backed by banks which failed, causing them not to pay out.
    2. Exploiting the fact that most people will not draw on their pots at the same time, so that the total payout is low compared to the total amount invested, so allowing some risk-based investments like shares and corporate bonds to be used.
    3. Putting the money into cash or near-cash, which makes it an unsuitable investment option for long term retirement income planning.

    The second perhaps combined with a little of the first seems most likely. If it's the first, look for clauses that fully expose people to losses if a stock market index drops by more than 50%. That's the sort of drop where the protection would be really needed and where the payout to provide it in extremely unlikely drops of 80%+ could become very substantial.
    Last edited by jamesd; 11-07-2012 at 4:29 AM.
    • Pincher
    • By Pincher 11th Jul 12, 1:48 AM
    • 6,516 Posts
    • 2,491 Thanks
    Pincher
    I wouldn't go for it for the insurance.
    I would go for the government bail-out when it falls apart.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,263Posts Today

5,981Users online

Martin's Twitter
  • Mini MSE is on half term next week, so I'm excited to be taking the week off to be daddy. As normal I'm signing of? https://t.co/G3366shWh1

  • I once blurted out on @gmb "Theresa May hasn't been given a poisoned chalice - she's been given a poisoned chalice? https://t.co/onfRbY3XVg

  • It'd be fascinating to know how history will judge Theresa May's premiership. Currently, it is hard to see it as a? https://t.co/eH77G0O9LA

  • Follow Martin