View more on these topics

Joint-life bond could solve the annuity problem

Although I did not hear it myself, I was interested to hear about a programme on Radio 4 which discussed the issue of compulsory annuity purchase by the age of 75 for holders of personal pension funds.

Several retired people expressed the view that if they had realised how very tightly restricted their options would be at retirement they would never have embarked on a personal pension.

What kind of message does this send out to younger listeners whom the Government claims to be trying to reach with stakeholder? An extremely negative one, I think we can all agree.

Beating every ounce of profit margin out of pensions does not make them a better proposition for anyone.

The most frustrating thing is that the annuity problem could be solved easily if only there was the political will.

Here is a suggestion. Upon reaching retiring age, the personal pensionholder could transfer his/her accumulated fund to a joint-life pensioner bond (with his/her spouse) and draw from it a set level of actuarially calculated rising income, tabulated according to age.

Annuity rates would emphatically not be a factor in this calculation, so the amount of income available could be set very much higher than under the present income-drawdown system, which is absurdly uncertain and complicated.

The level of income perm-itted need not be either flexible or variable – too many options only make life. more difficult for everyone – but, allowing for a certain level of assumed future investment growth, would be geared to be sustainable until the younger of the two annuitants reaches 100.

By then, the fund might be fully depleted and the pensioner might become a burden on the state but surely not for very long.

On death, the remaining value of the pensioner bond could be passed on to the annuitant&#39s children by way of contributions to personal pensions of their own, perhaps subject to a modest tax charge of 10 per cent.

For bequests to parties other than the annuitants&#39 own children, the tax charge might be 20 per cent. Thus, the Exchequer would still receive at least some revenue from the arrangement – always a factor, let us not forget – but pensioners could very well be significantly better off, as would their children and, very probably, the population at large would be much more inclined to save into a personal pension.

Are you listening Mr McCartney? If only.

Julian Stevens


WDS Independent Financial Advisers,

Kingswood, Bristol


CIS offers to act as guinea pig for Saltr

CIS is offering to be a case study for product providers which are wary of the ABI&#39s Raising Standards initiative. The life office is urging providers to sign up for the accreditation mark, believing it is the industry&#39s last opportunity for self-regulation before changes are forced on it by the Sandler and FSA reviews. CIS […]

European star Powe quits Invesco Perpetual

Invesco Perpetual star European manager Rory Powe has quit the firm to manage an independent hedge fund.Powe has managed the £2bn fund since January 1991, and is ranked first quartile over 10 and five years. However, Powe’s heavy bet on technology last year sent the fund plummeting to the bottom of the performance tables since […]

Clerical applies MVA on with-profits fund

Clerical Medical has imposed a market value adjuster of 7.5 per cent on encashments of more than £50,000 from its with-profits fund. It is blaming continuing stockmarket falls, saying the trigger point for an MVA review was breached some time ago. The MVA will apply to the excess over £50,000 on withdrawals from its with-profits […]

SocGen targets wealthy clients

French banking giant Societe Generale is introducing an offshore life and pension brand aimed at UK high-net-worth clients to be sold exclusively through IFAs. SG Life & Pensions will also offer access to a wealth management service with products from SocGen&#39s private bank, Hambros. It will launch with three investment bonds run through Guernsey and […]

Frexit & contagion risk in Europe

Many commentators have suggested the UK’s exit from the European Union will trigger a domino effect, leading to its eventual break-up. Neptune Head of European Equities Rob Burnett discusses the likelihood of this happening. Click here to read more Important informationInvestment risks Neptune funds may have a high historic volatility rating and past performance is […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm