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Why do advisers sell annuities?

Julian Stevens asks why anybody should want a annuity, as if no adviser has ever asked this question before.

He is a bit behind the times I fear. Why indeed should anybody give away, lose completely, sacrifice, their capital for such a product, and at the same time enrich the insurance company?

A pension is an investment product in principle, just like any other, in which the saver expects to make a profit. And they may do so, until retirement.

They then give this capital irrevocably, yes permanently, away in return for a taxed income but the fact is they will never make a profit on this deal, let alone even get their money back. So why do so many IFAs sell them to their clients when there are, as Julian points out, so many better alternatives?

And if the client tries to hang on to their capital and not give it away to the insurance company, the Government taxes it at 82 per cent. How can pensions be good advice for anybody? Unless you work for the Government, of course, and never have to buy an annuity.

Philip Martin


Fair exchange

Clients with a six-figure or bigger sum in a self-invested personal pension can take advantage of many investments that their less wealthy counterparts may baulk at. A full Sipp gives clients access to more specialist areas such as commercial property, foreign currency, warrants, gilts, futures, options, hedge funds and even private equity. One popular investment […]

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