Purchasing an annuity

Listen carefully…

Hear a knocking noise?

That’s right – it’s the sound of me banging my head against the desk after reading yet another misleading article from the Telegraph. I really thought things might change, but this was brought to my attention: 

http://www.telegraph.co.uk/finance/personalfinance/pensions/10343841/Proof-why-annuities-are-often-the-worst-option.html

Dan Hyde of the Telegraph

As you can see it’s an article from Dan Hyde. Dan is Deputy Personal Finance Editor across the Daily Telegraph, Sunday Telegraph and online. He was named Young Financial Journalist of the Year at the Wincott Awards in 2011. Dan looks like a nice chap with his heart in the right place, such a shame then, that on this occasion he’s talking through his hat.

In the article he makes a comparison between a lifetime annuity and corporate and government bonds. Eh?  He says that money invested into the bonds is likely to do better than money spent on a pension annuity. Eh?  He uses a sum of £100,000 in his calculations. A lifetime annuity is something you usually purchase at retirement, and which provides a guaranteed income for life.

Now, Dan is right in some respects, but the article is misleading in suggesting that you have a choice with your Personal Pension pot whether to choose an annuity or government bonds. If the hypothetical sum is held in a pension then you cannot take it all out  and put it into bonds. You have until age 75 to purchase an annuity using pension funds, but you can’t directly take the funds out in the same way you could, say, an ISA.

A careful reading of the article reveals that Dan quotes the following: “Alan Higham, chief executive of Annuity Direct, said: “If you are coming up to retirement, you really need to consider how much you need certainty of income. If you have other savings, it might not be necessary to buy an annuity at all””.  Brilliant.

But no independent financial adviser worth his salt would ever recommend purchasing a lifetime annuity, or any other pension annuity or pension income product from savings. C’est impossible.  And Higham specifically says that for less secure investments, “other savings” would be used.  Are you confused.com?  I was!

So let’s recap: you can purchase an annuity with your pension pot, the money you’ve saved over time in the scheme (there are other options to lifetime annuities including various forms of drawdown, and various forms of annuities including temporary and impaired).  A Lifetime Annuity provides a certain, guaranteed income. 

On the other hand, you can use your additional savings (ISA’s, cash deposits etc) to invest into any number of bonds. These can often produce a decent return over the long term, but Dan adds, “The bond could be sold earlier, but you might get back less than you paid. You also run the risk of the company going bust, along with your capital”. 

All this makes trying to scare people away from Annuities a bit pointless, and completely disingenuous.

Further, Dan states that he’s made the comparison using “today’s best rates“. Best rates for what? Is he quoting rates for 55 year-olds, 65 year-olds, rates with guaranteed spousal pensions, annuities for impaired lives, or smokers? Is the rate he quotes for index-linked or level annuities? What about temporary annuities, which provide an income for a limited time? It makes a big difference.

By using a trusted and respected independent financial adviser (ahem!) you can be sure that he will use your Open Market Option to find the best retirement product from the most suitable provider to suit your personal circumstances and needs. Rest assured that this will not increase any fees you pay. Having found the very best provider your IFA will complete the paperwork for you and make any switches necessary.

If you have any additional savings, we… I mean HE, will find the best home for them, whether you’re looking for security, growth or both.

OK, I admit it. There is a not-so-subliminal sales message in this. But there’s another message: don’t believe all you read in the newspapers, and definitely don’t make a decision based on a headline written by the unqualified, unauthorised and unregulated. They’re there to sell papers first, inform second (possibly).

Brian Hill

Dan - this one’s for you CII RO4 Syllabus 2013

Pension Transfer Advice – Should I?

Many moons ago, when everyone had money and stock markets were going through the roof, members of our beloved financial services industry were themselves advised that traditional final salary schemes were unlikely to equal the returns offered by stock market-linked private pension schemes and were urged to offer pension transfer advice to members of the older schemes .

However, the old schemes had cast-iron guarantees and the new schemes had none. We all know that stock markets fall as well as rise, so caution all round was the watchword of the day, certainly for us here at Jones Hill.

Not only are final salary schemes inherently stronger, but certain public sector schemes even outclass the private final salary schemes, not least those offered to our Armed Services.

Regular readers will know that I keep a high horse, fed and fully tacked for special occasions, and now it’s time for me to take it for another gallop. Why? Because once again the notorious Ex-Armed Forces Pension Specialists are seeking to drag members of our armed forces from the security of their schemes into something reliant upon stock market performance.

Now, it’s fair to recognise that public sector schemes are undergoing change. The media is adept at finding the darkest of scenarios to paint for its consumers and there is unrest within the employee population. Nevertheless, preying upon individual insecurities is an ethically dubious way of conducting business, and our armed forces have enough minefields to deal with as it is.

The Ex-AFPS targets retiring or retired members of the Armed Forces Pension Scheme and its name may fool you into thinking they’re the same thing. In fact, they are a part of Caledonian International Associates, a company based in Chile and whose advice policy seems linked with Garda World, an international risk management group with an office in London, but based principally in Dubai.

Ex-AFPS declares correctly that it is not authorised to give advice, but acts as introducer to other, unspecified companies, presumably Caledonian and Garda.  If alarm bells aren’t yet ringing I have a bridge in London I’d like to sell you.

Whether or not you are a member of the armed forces or any other final salary scheme, you should take advice from an independent financial adviser, regulated and based in the UK.

Whilst Caledonian and Garda have a nominal UK presence, and presumably could prove UK registration, I would steer clear of any group using scare tactics to drive you towards any decision that you may have your entire retirement to regret. I would be particularly sceptical of any business which sets up a separate company to deal in an area which courts so much controversy, and which could be dissolved at the first sign of trouble.

I put my concerns directly to the man in charge of Ex-AFPS, who promised to make changes and clarify the situation. To date, nothing has happened. Draw your own conclusions.

Brian Hill

Top 200 UK rated IFA

How to Find a Decent Independent Financial Adviser

You may have spent some time before coming to this website, just looking for a decent, reputable, independent financial adviser. I’d like to think that you’re here because a friend recommended us, or maybe because you’ve used Jones Hill in the past, and been very happy with the service we offer.

But the fact is, you may have stumbled upon us completely by accident and you’re taking the first halting steps into the world of financial advice. You hope that we’re the right company for you, but frankly, you don’t know for sure.

Well, I’m pleased to say that now you can be.

I rarely refer people to directory sites. Most of them are simply listings of financial advisers who have paid to be there. Generally speaking there’s no real rating system, just a list of services offered.

VouchedFor is different. It’s the only site which relies purely on customer input and recommendation. If it says an adviser is great or lousy, it’s because clients say he’s great or lousy.

Think of it as Tripadvisor for independent financial advisers.

So, I’m doubly, no, triply pleased to let you know just how highly our clients think of us.

Firstly, we’re the Highest Reviewed IFA in Wiltshire; secondly, we’re the 26^th highest rated in the country, and thirdly, I don’t do so badly myself. Here’s a link to my profile there.

If you’ve been pleased with our services in the past, or you’re a happy existing client, then I’d love you to leave a review, which you can do from the link above.

Somewhere in the Jones Hill write-up it says I’m 54. Anyone who knows me will confirm that it MUST be a misprint…

Brian

Pension Liberation Fraud - come in fraudsters, your time is up

Have you been contacted about releasing cash from your pension early?

I’ve had alot of calls from private individuals, pension scheme administrators and trustees since I first posted a blog on pension liberation fraud.

Good news – the writing is on the wall for Pension Liberation Fraudsters – your time is up!!

@BBCEmmaSimpson reported on BBC this morning during a raid on a suspected Fraudsters premises and police took away plenty of evidence.

Here as some of the sorts of websites which are stalking your pension, hopefully they were raided this morning too!

http://www.moveyourpensionforcash.co.uk/

http://www.pensionbackedloans.com/

http://www.pensioncashin.com/

http://www.releasemypension.info/

http://www.freemypensionfund.com/

http://www.frozen-pensions.co.uk/

The first 2 appear to be owned and operated by regulated mortgage adviser Anthony Chewins

Pensioncashin appears to be owned and operated by Safraz Ali

And probably the most blatant: http://www.pensioncashnow.net/ where Chris on 0203 416 6360 will happily strip out your pension fund for you.

Here’s the video of Emma’s report on the raid: http://www.bbc.co.uk/news/business-22474672