View more on these topics

Lottery of timing to buy annuities

If markets get back to the 5,000 level, then a large number of people should get buying an annuity “over and done with” William Burrows Annuities director Billy Burrows has urged.
Speaking at Money Marketing’s annuity round table, Burrows said that his company is investigating a number of exit strategies for people who may have seen investments suffer by as much as 15 to 20 per cent.

“We are doing a bit of work on various strategies for people whose funds are 15 to 20 per cent lower. For those with a bit of money, there are some interesting exit strategies. They might use the flexible annuity to do phased retirement.”

He also believes there is a risk that some investors will simply do nothing in the hope of a market recovery.
He said: “It is dangerous for people who just sit back and hope the market recovers because it could all go south again. People should convert their pension fund into annuities over a period of time when there are good buying opportunities.”

“The people most affected are those who need to buy an annuity but have kept themselves in a managed fund and those are 20 per cent down. If the market got to 5,000, many people would be better off buying an annuity and getting it over and done with.”

Thinc group director of research David Cartwright said: “It is a timing lottery. The variable rates have been pretty stable, it is the pension pot that varies. Knowing what you can physically buy in that last four or five years before retirement needs a lot of close guidance.

“You almost need to know where that client is going to go beyond those five years. Drawdown may be different but you do not want to be in a fund that is 60 per cent equities if you are going to buy an annuity.”

Burrows said: “You cannot really plan your investment strategy pre-retirement without some idea of what you want to do at retirement.”

The Retirement Adviser director of retirement planning Nick Flynn said: “Taking money from a falling fund is very painful and there are a lot of people stuck with bills to pay. If they can reduce their income, then that is all well and good.”

Annuity Direct director Stuart Bayliss added: “People are amazed when you show them how much they have to get back to as a percentage – the fact you have got to go up by more – and then you show them by how much and it is horrid.”
Bayliss said that in the last month he has seen several clients opt for a purchased life annuity.

He said: “Purchased life annuities have increased. We did six last month. That is people choosing to do it themselves. People are saying they do not want to take the tax-free cash. You have to suggest a PLA.

“They are people who have tended to be in cash already, conservative investors. They are liking the idea of the lifetime certainty rather than the bank account.”


Watch out for traps

As macro economics dominates, it is no wonder that many clients will fail to see the benefits for them. It is clear that the Chancellor, if not the Prime Minister, hopes the proximity of Christmas will mean the main beneficiaries – those on lower incomes – will feel they can again spend and this infusion of cash into the retail sector will help the country get going.

Freeze puts squeeze on pension limits

This pre-Budget report was all about temporary tax giveaways to entice people to spend our way out of recession. But there is no such thing as a free lunch, so it was always going to be the case that the Government would raise taxes for some.


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