Over the last few weeks I have noticed a number of instances of respected commentators using what I call ‘throw away lines’ either on the radio or in the press.
Whilst these might have had dramatic impact when used, in the cold light of day they can be quite damaging.
I must confess to being guilty of this offence myself. I remember many years ago being quoted on the front page of the personal finance section of the Sunday Times saying “Insurance companies are screwing their clients”.
My immediate reaction when reading my own comments was who am I to say this because I didn’t really know what went on behind the closed doors at insurance companies.
That was before I joined Prudential. After a two year stint of corporate life I came away with the conclusion that those jolly clever actuaries do understand their numbers but there are so many variables in annuity pricing that a small change in one of the underlying assumptions can easily turn a profit into a loss.
The first comment that came to my attention was Adam Posen, a former member of the Bank of England’s monetary policy committee, when he said ‘it is tough luck’ that pensioners are faced with investing in annuities at such low interest rates during an excellent radio 4 programme; Quantitative Easing: Miracle Cure or Dangerous Addiction?
My view is that pensioners need much more than reminding they are unlucky to retire at a time when annuities are at an all-time low. They need urgent Government action to ensure they get better value when they convert their pension pots into income.
As an aside this programme is compulsory listening to anyone interested in understanding how the effects of QE will impact on the financial position of pensioners in the future. It is still available on the BBC iPlayer through this link. If you listen to this you might have seconds thoughts about recommending level annuities as the programme examines the link the between QE and inflation.
The other comment was by the well-known pension campaigner Ros Altmann who was quoted in The Telegraph saying “annuity salesmen – both at insurance companies and third-party brokers – had been given ’a licence to steal’”.
I think I would have described myself as an annuity broker when I was running my previous business but I certainly had no such licence. As my wife reminded me, if I had I didn’t go a very good job as there has been no sign of posh holidays in the sun or fast cars.
There is of course a serious side to this. It is easy to make headline grabbing comments but much harder to do anything about changing the world for the better.
Both Adam Posen and Ros Altmann have done a lot to help improve the financial well-being of the older generation, and Ros has often gone well past the call of duty in her campaigning efforts, so both should be excused for making a few un-guarded comments.
If we sweep away the hard luck stories and aggressive headlines we can see a lot of progress and good deeds.
For instance the good work in promoting the open market option and the increase in brokers and advisers who are helping their clients get a higher income by delving deeper into their medical history. Also let’s not forget those annuity consultants and advisers who are going the extra mile to ensure their clients are aware of all the relevant options.
Instead of talking about a ‘licence to steal’ which is something I don’t see in the market, let’s talk about a licence to make things better. Where better to start than with people who make the rules in the first place. As someone said to me recently, “It seems that regulation is getting in the way of common sense”.
Billy Burrows is director of the Retirement Academy and head of business development at Annuity Line