Archive for the ‘Annuity’ Category
Silver inflation is on the up
Rising costs of fuel and food have greater impact on the elderly and the young.
So the imminent rise in inflation – partly the result of the decline in the value of the pound – means pensioners will see their cost of living rise faster than others.
Alliance Trust calculates that the ‘silver’ inflation rate for people over 75 is now 3.2% against the 2.8% rate for under-30s, who benefit more from falling prices for gadgets and clothes.
Age UK do a similar index and the level of inflation is above that recorded by the Retail Price Index or Consumer Price Index. That’s a really important point for those in receipt of an index linked pension to note.
You actual rate of inflation is likely to be higher than any index that your pension is pegged to.
Steve Clark
Win² in action!
After a long consultation the coalition government have passed the Consumer Insurance (Disclosure and Representations) Act 2012 or CIDAR for short. It’s due to come into force from 8th March 2013.
Until now it was up to you as the consumer to tell the insurance company what they needed to know. When facts became clear after the policy was issued that would have influenced the insurance company this was known as “non-disclosure”. In other words you hadn’t disclosed material facts. In that case the legal liability was with the consumer.
Under the new law you’ll still be responsible for taking reasonable care in providing the information you’re asked for. However, it’s up to us as your adviser to ensure we request all the appropriate information.
Enhanced annuity providers estimate that 50% of applicants lose out on vital income because the medical information they gave wasn’t complete.
So what?
We specialise in retirement planning and one area where this will impact on our business is in relation to enhanced annuities. These are the type of pension that takes into account any health or lifestyle issues. In other words you get more income if you are less healthy than the average man or woman your age.
Here at 44 Financial we do a lot of things and are very good, for example, at making tea. However we’re not medical experts. So what we’ve done is to build into our retirement advice service an external interview process for clients who may qualify for an enhanced annuity.
The interview is conducted by a qualified nurse at a time to suit you – even weekends or evenings. We can then make sure that your asked all the right questions (to comply with CIDAR) and also to help make sure you get the maximum amount of income from your pension pot.
Why have you done this?
It’s all part of the Win² philosophy that we use when taking key decisions about our business. Basically if we take decisions that suit us we always try to make sure that our clients benefits too. In other words – it’s got to be a win-win situation for both of us.
In this case we make sure we’re complying with the CIDAR law, Financial Services Authority regulations and, at the same time, our clients get the as much income as they can when they retire.
That’s Win² in action! Simple isn’t it? For us, yes; but for many of our larger competitors it seems a struggle to make sure that the clients’ interests stay at the heart of what they do.
We’d like to know more about what you’re planning for retirement. If you’d like to know how we can help you pleasecontact us.
Steve Clark
All aboard the QE!
The Bank of England’s Monetary Policy Committee (MPC) resumed quantitative easing again today.
They’ve announced that the Bank of England will purchase £50bn of government fixed interest securities through until November.
The Bank Rate was left unchanged at 0.50%.
This move comes in response to the ongoing recession, a worsening in the global outlook and a marked easing in international commodity prices, including oil.
According to the economists at Lloyds Bank, growth prospects for the near future looks set to be subdued at best.
The MPC is expected to provide further stimulus beyond November with purchases forecast to reach £500bn by end-2013.
Whilst this move is welcomed at a macro level in that it’s designed to promote economic recovery it will inevitable distort the market for UK government bonds. The National Association of Pension Funds has already been very critical of the negative impact that previous bouts of QE have had on annuity rates. Depending on the type of assets the Bank of England will purchase this could just serve to drive down rates further.
Steve Clark
Don’t leave your pension on auto-pilot!
The media is full of doom and gloom regarding the fact that Annuity rates are at an all-time low. Annuity rates are the factors used by insurance companies to decide how much pension they’ll pay you for your pension savings. Low rates are bad news if you are heading for retirement.
The majority of people getting to retirement rely on buying a pension but remain unaware that over recent years annuity rates have consistently fallen.
As Billy Burrows, director of Better Retirement Group, puts it:
“Annuity rates have been falling almost continuously since 1990. Back then, the annuity rate for a 65-year-old man was more than 15.5%; today it is less than 6.5%, a fall in excess of 50%. In August, annuity income fell by more than £300 a year, or 5%, making this the largest monthly fall on record.”
Pension Airways
Pension planning is a bit like taking a flight. It takes a lot of effort, time and a bit of money to get airborne and on your way to your retirement destination. You need to make sure you know where you’re going, when you are going to get there and that you’ve got enough fuel to get there. You’ll also need to check if there’s anything on your route that’s likely to disrupt you – e.g. bad weather.
If you are some way away from retirement once you are in the air and have reached cruising altitude you can put your plan on “auto-pilot” and check every so often that you are still on the right course.
However, as you get closer to retirement and your final descent you really need to be back at the controls and making all those key decisions and judgements that will help you land safely for your retirement.
My Pension Roadmap
We want to start working with you on your journey towards retirement. That’s why we’ve created our subscription service called My Pension Roadmap. You can read more about it here and here.
We’d love to meet with you or your employees to help you start planning for retirement. Contact us for a free initial meeting to see how we can help.
Don’t leave your retirement plans on auto-pilot – contact us today!
Steve Clark
Who do you trust when you buy an annuity?
We have been working with a couple of clients recently who have subscribed to our Retirement Options Programme. Basically this advice service leads you through the many options for turning all of your accumulated pension plans into a regular income. This being the pensions industry there’s always more than one way to skin a pensions cat!
The last two annuities we set up showed how poor the income was that was being offered by the existing insurer. In the first case we increased the clients income by nearly 30% and in the second case by just over 25%. This is a huge increase in income that’s payable for the rest of the client’s life.
Depending on how long these clients and their spouse’s live the extra income could run into tens of thousands of pounds.
These two cases are for straightforward annuity purchases. Neither of these clients qualified for any enhanced annuity because of ill-health or lifestyle issues.
Needless to say both clients are incredibly pleased that they joined the Retirement Options Programme and took our advice.
Pension providers will now do more to encourage customers to shop around before buying an annuity. The trade body the Association of British Insurers has published a new ‘Best Practice Guide for the Retirement Process’. It sets out the principles pension providers are expected to follow. It’s designed to help increase customer understanding of retirement and purchase the right annuity for their circumstances.
The question is this – do you trust your provider to point you in the right direction or would you like to be in the same position as our clients above who have squeezed the maximum income from their pension pot?
If you are near retirement and would like to join our Retirement Options Programme please contact us here. Don’t forget once you’ve bought your annuity it’s too late to do anything about it.