Saturday, August 19, 2017

Pensions

Well age catches up with all of us eventually  including yours truly. 

On this topic on  a more serious note,  I applied recently for one of the private pensions I had paid into for years, since the 1980s. Under changes  introduced by the last government various options were introduced for those who have saved for their pensions, including rights to take all or part of the pension fund in cash as the  idea of taking pensions in the form of an annuity seemed to be thought of as second best possibly because of points published in today's Daily Telegraph reading:

The research, conducted by Fidelity, the fund manager, shows that a typical pension pot in 2017 would be able to produce an annual income of only £6,607, only just over half the £12,193 retirees in 2007 enjoyed. The analysis compares the 10 years before 2007 – the year when Northern Rock imploded and the US investment bank Bear Sterns realised it was in trouble – with the past decade.

In fact as UK interest rates in the 1980s were very high, running as I recollect to 17%, some private pension providers at that time published advertisements signifying that pensions would be guaranteed to provide pensions of at least 9% or 10% or even higher, of the pension monies saved by the private individual. 

Benefiting from such guarantees at a time of very low general interest rates caused by quantum easing, surely makes annuities well worth while for those who started pensions saving in the 1980s or maybe earlier?

One of my sisters is a pensions adviser so I wrote to her recently about this saying inter alia:

At first the pension provider (now Canada Life; initially the Albany which I think is defunct) quoted me a figure around the Telegraph typical £6,607, mentioned above. When I complained they quoted £12,000+ but when I pointed out that they had still not quoted for the most significant pension they came back with a figure of £17,000+ which I am happy to take.

The 2nd pension  provider (now Phoenix initially Sun Alliance) gave  me all the various quotes including one which pays a large annual figure if the pension is taken as an annual lump sum in arrears. In fact delaying taking that pension for another year or two, both saves tax and gives an even higher pension as their figures made plain.

Both pension companies are keen to snowball one with large volumes of paper including details of independent advisers who one can approach but if they ....gave simple details of the pensions available under their plans, the position would be far simpler and would negate the reason for having so many potential advisers.

To err is human but how one deals with a mistake when the matter is highlighted is important. I telephoned Canada Life upon receiving their low quote and made representations - in other words - complained gently. They then gave me the higher estimates outlined above but gave no explanation let alone apology for the huge error in their previous quotes even though had I relied upon the company's figures, the cost of their error could have easily exceeded £100,000 over the period of retirement.

If one makes provision with a commercial concern for one's retirement pension, there should be a duty on the commercial concern when relevant, to identify in relatively simple terms, what type of pension the payments made over the years can provide.

If a mistake is made by the company particularly a potentially expensive error then the company should apologise.

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