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Monday, October 15, 2012

The death of annuities

It appears that retiring workers are refusing to buy annuities in an apparent rebellion against the drastic decline in the rates on offer.

Now doesn’t that come as a surprise.

As reported in yesterday’s Sunday Telegraph - three and a half years ago, three annuities were sold for every four people turning 65. Now the figure is just one in two. As a result, almost a million potential annuity buyers have become "annuity refuseniks" since 2009.

As a result of the UK Government’s policy of QE (conjuring-up money from nowhere to buy UK Gilts) the value of annuities has plummeted.

Consumers are not daft – if they can they are waiting to purchase annuities or taking alternative actions. In truth, the Government will be forced to change the rules of pensions to help the zillions of over-65s who cannot fund their retirement. It is only a matter of time.

In a parallel universe, that is known as the public sector, final salary pensions are still being paid and UK taxpayers are still being expected to fund their state employee brethren. This is something else that will change – it is only a matter of time.

One of the comments to the Sunday Telegraph article made me laugh. It was an extract from a recent public sector job advertisement.

“Excellent final salary pension scheme.  
A generous relocation package.
Flexible working hours.
Generous annual leave provisions.
Special leave provisions for employees with caring responsibilities.
Special leave for the observance of religious festivals."

We Brits must be mad to put-up with this nonsense.

The marketing issue that drops out of this semi-rant is that the dynamics of the UK pension industry are changing in front of our eyes. If you work in it I hope you are aware of what is happening. Dick Stroud

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