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Saturday November 18th, 2017 

News Archive - October 2011

The truth about Personal Pensions

6/10/2011

I'm sorry if this is a bit of a rant but I have just been reading yet another ill-informed article about personal pensions. They printed several comments from disappointed investors who are unhappy that the value of their pension fund, and annuity rates, have fallen in the few months prior to their retirement.

I have a great deal of sympathy for people in this predicament, but the fact is that steps can be taken to remedy this probem or to prevent it from happening in the first place. First of all, one pensioner claimed that he had no control over the investments within his pension so he was powerless to stop it from falling in value as he approached retirement.

Modern personal pensions (NOT just Self Invested Personal Pensions) generally have a very wide range of investment options. This includes funds which will automatically move you into less volatile areas as you get closer to retirement. Switches between funds are usually free. If you have an older style pension then it is often beneficial to change to a new one. There will be a cost involved but the benefits usually outweight the disadvantages.The best way to acheive this is to deal with an independent financial adviser. Yes, well I would say that wouldn't I? But the truth is that if you do not take advice in an area where you have limited knowledge, then you have to live with the consequences.

The second complaint is that annuity rates have fallen recently due to to the general financial uncertainty. Again, this is something that I have witnesssed and I do sympathise.

However, some people have been delaying drawing their pensions for several years waiting for annuity rates to improve. The general consensus is that annuity rates are not likely to rise in the short or the medium term, and indeed there is no real reason why they should increase much in the long term either. The main reason for this is steadily increasing longevity and the general environment of low growth and low interest rates.

The killer for those who are delaying their annuity is that they are missing out on income. The longer they delay, the more income they have missed. Because of this, annuity rates could rise and they would still end up taking many years to catch up with the income they could have had if they had drawn the annuity sooner. If a person is no longer paying into a pension or working, then I believe that they need extremely strong and valid reasons to delay drawing it.

If you are worried about your pensions, please call Mulberry Financial - you might find that things aren't as bad as you read in the papers.   

 

The case for the defence

23/10/2011


After my last moan (above) I emailed the BBC and they were kind enough to print some of my comments about their previous article.

You can read them here.

The full content of my advice to people approaching retirement (the sooner you take action, the better) is here.

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