Budget 2014 - watch with us!

So yes, whether it's actually a sensible long term measure for individuals or the country, you approve of this because you want providers to get a kicking.

And at least some of the issues have been sorted voluntarily - at least some companies ( I can't speak for all and would not pretend to) have been offering the same rates to existing and new customers for years.

I certainly think that SOME are profiteering scumbags who treat their punters with contempt. Are any of the things I have mentioned untrue?

The trade has not cleaned itself up voluntarily, so no surprise that there are people who want to give them a good kicking.

Right so you are not saying that annuities are inherently bad value, but that SOME providers are overcharging SOME subsets of their customer base? OK, agreed. But that is already being phased rapidly out of the market, and I'm pretty sure that the FCA didn't find any sizeable evidence of differences between omo and vesting rates overall although I am working from memory.

However, I think I should give up as it's pretty obvious that you have an inherent issue with providers, think they are all profiteering scumbags who should be punished, and this is their punishment.

I think some areas of regulation needed tightened up to sort out the few who are misbehaving, and that more options should be offered to customers in terms of their income vehicles on retirement. I don't think that giving everybody unfettered access to the money that they and their employers have save for their retirement as a lump sum is wise. I think the government is going for a populist, knee jerk response to a problem which could be far more easily solved. I think it's going to bite us in the arse in a few years/decades time. It's also probably a short term tax raising option (cynic...yup!)

I also dread to think what will happen to house prices as folk take their pension as a lump sum and promptly shove it all in to buy to let. The younger generation getting even more screwed over probably.

Well, let's suppose that today, an open market, level, no-guarantee rate for a single-life 60-year old man was, say, 5.410%. And let's suppose that the Short And Merry Life Assurance co was offering its maturing policyholders 5.2%. I'd say that was Not Good Value.

In the same way that a simple Stakeholder Tracker fund from a major supplier might have an AMC of 0.25%, but Short And Merry sold its punters a Tracker, or a closet tracker, at 1.45% if they were loyal, long-established customers of ten years standing, or 2.25% if they were even more loyal and long-established. I'd say that was Not Good Value. On a fund of £100,000 over twenty years, it would cost the mug punter a lot.

I suppose my point is - fix those problems which actually exist in the market. And that was coming anyway, they FCA have been all over annuities like a rash recently.

I don't think allowing unrestricted ability to withdraw pension funds as cash is the solution. People as a whole tend to underestimate how long they will live for in retirement, and IME this could well lead to an even bigger pensions crisis than we have at the moment. It also raises questions around things like care home fees - at the moment they can only raid the income, but if the pot is not easily accessible... What about bankruptcy?

Define "good value"? What is a good value annuity?

Ironically, the companies most likely to go the wall are probably the ones who are most competitive as they tend to be specialists with little diversification. The big juggernauts will probably be ok

OK. but there are companies who abuse their customers; there are companies that overcharge; there are companies that take advantage of the stupidity, laziness trust of their customers; there are companies who have high costs, maybe because they are bloated and inefficient; maybe because they squirrel away the clients money in soft commissions and hidden backscratching; maybe just because they get away with it and think it's normal.

I've seen companies that announce figures which are slanted high or low to gain a marketing advantage, or to achieve the profit margins from the product specifications, and to hell with the punters. I've seen companies with huge orphan assets, which have been accumulated by systematically underpaying their powerless clients over many years.

The result is that the punter doesn't get a fair deal. If the companies can't or won't give good value, then I'm happy for them to go to the wall.

The trade doesn't deserve, and hasn't earned, trust or goodwill. Hence it doesn't get it.

My point was that annuity providers are not all one homogenous mass, they don't all do the same things. Sometimes they're not even consistent between their own products. Or they might be pricing at a high level in one particular area for a reason that isn't actually to do with profiteering in the slightest but could look that way if you don't understand enough about the products, their capabilities etc etc etc. Some areas are fiercely competitive between providers which means that margins are wafer thin - fact. There is a good reason why there are not actually that many annuity providers out there; with the notable exception of overpriced vesting book annuities it is not that easy to make the vast sums of money people seem to imagine.

However I get the feeling nothing I say will be believed so I might as well not bother.

I think the concept of an annuity is a fundamentally sound one - some changes were needed in certain areas yes but I firmly believe that this is just going to be storing up a crapload of problems for the future.

"Profiteering? On occasions! but not to the extent that is being made out."

You see, from my perspective that's like "Burglary? Well yes, he does, but not all the time"

That's hardly new :)

I'm just not convinced that this is the right solution - it feels too drastic and I think that for a lot of people (probably the same ones who wouldn't shop around or get advice if it was written in font 60!) it could be dangerous. I think if you are going to say to people that they must save for their retirement (i.e. auto enrolment, yes I know you can opt out but YKWIM!) then it seems a bit daft to then not put any sort of protection in place that means that money is for an income in retirement. I think they should have maybe looked at allowing a wider range of income generating vehicles, more drawdown, more asset backed annuities, income generating bonds but with some degree of protection against blowing the lot.

And before you ask no, I don't actually have a vested interest

it's got somewhat better because they are now forced against their will to tell their mug punters that they could do better on the open market.

Agreed, and I'm not disputing that happens (although it's got a lot better recently and I know of several firms who offer the same prices to vesting customer as they do to open market.) I'm not saying the market is perfect, I don't think any market is without issues. But "cartel style price fixing" - not from what I can see from close up. Profiteering? On occasions! but not to the extent that is being made out.

It's not that easy to make huge profits on annuities at the moment - some firms are managing it from their vesting book but their numbers are dwindling rapidly.

the life offices have well-established form for giving their own customers rates that are worse than open market rates. They also charge their long-standing policyholders higher than market prices for their annual service charges.

This is a very common form of loyalty penalty, when you overcharge your regular customers because you know most of them are too thick or too lazy or too trusting to find a better bargain.

You have probably found the same with home and car insurance renewals, or with gas and electricity prices.

Cartel style fixing - to the best of my knowledge (which is fairly extensive) this isn't going on to any great degree. I'm sure there are isolated incidents but no, there's not wide spread cartel style fixing. I also know for a fact that at least some parts of the market really aren't experiencing vast profiteering.

I think there should have been some better options - more encouragement of drawdown type products which already exist and are probably more suitable for some people - but I think at a bare minimum there should be some sort of requirement to get financial advice before you can take your entire pension in cash. You're right that many people don't understand annuities although it's not that hard to shop around, but lots of people also don't have much ability to plan long term for the future. Especially with auto enrolment now, lots of people will have cash in a DC scheme because it's just been taken without any thought.

I think we could potentially be storing up even more of a pensions crisis for the future by doing this - longevity is increasing after all.

Statistically - do you not think though that the annuity market is vastly unfair? These companies have known that people must buy a product, and so the opportunity for profiteering and cartel-style fixing of rates etc is huge.
The average pensioner navigating that market with little or no knowledge hasn't a hope in hell of knowing whether they come away with a good deal.

I don't buy the idea that you can't trust people with their own money. You will always get fools ready to be parted from their cash - no reason why the rest of us should be so restricted in our choices.

TiP I agree. Annuity rates have been awful for a long time, and this just cuts the rug right from under them.

We have always been very sceptical of pensions, because it has seemed that you can pay in, and pay in and then get bugger all back if the annuity market crashes just as you retire and are forced into buying one at a dreadful rate.

Jane - Some companies own a house in London for staff at all income levels to stay in if there is company business over night as that is cheaper than constant hotels.
Which they can still do, but they must pay tax on the purchase. And again, your point about passing property in trust to avoid a rash sale by a 20 year who suddenly inherits - still very possible to do, but taxes must be paid.
Let's face it, the only people passing whole properties in a trust are going to be the very wealthy.

It might suit you but allowing everyone free access to their funds as cash isn't all that wise IMO. You're also oversimplifying the position with annuities - the market has flaws but there are also parts of it which are incredibly competitive right now.

Annuity rates have been falling for far more complex reasons than "sticking two fingers up to the government"

THe annuity industry have been sticking two fingers up at the government since auto enrollment started under the last lot
this is (richly deserved) payback time

suits me to a tee as I never planned to use a pension scheme : the higher flexible ISA allowance is much more up my street

You cynic PigletJohn!

The annuity/pension reforms are scary ime. Some reform was probably needed but this feels a bit like throwing the baby out with the bathwater!

there must be an election coming up.

So there will be a mass of retirements on the first day of each tax year so people can take maximum advantage of being taxed at their marginal rate?

I saw the rise from age 55 to 57 on another forum and as I have been planning getting the 25% when I turn 55 which is not too long I was disappointed. I have been waiting for them to abolish the cash free lumop sum for years and bet they do before I read 55/57 or whatever it will be. However what you post above suggests that 55 remains so may be the other thread was just wrong.

I didn't see this on the BBC, but Chronic Investor says (I shall have to think about this, because the deal on Pension contributions is that they are untaxed on the way in, but taxed on the way out. and it has always been said that the tax concessions are to prevent you being a burden on the state in your old age):

• From April 2015 anyone over the age of 55 will be able to take their entire pension pot as cash.

• Currently anyone with a defined contribution pension can choose to take a 25 per cent tax-free lump sum from their pot when they retire. If you take a larger lump sum, you have to pay 55 per cent tax on the excess, but this is being reduced to your marginal tax rate on the excess – 20 per cent for basic rate tax payers and 40 per cent for higher rate tax payers.

• From next week, the 27 March, the guaranteed income you require before you qualify for flexible drawdown, an arrangement where the additional income you take from your pension pot is unrestricted, falls from £20,000 to £12,000. The move is retrospective so anyone in drawdown can benefit

Oh no...... I just heard that drawing a pension at 55 has been changed to 57. When I set mine up I could draw it at 50. I already felt cheated when they retrospectively changed the rules from 50 to 55. I could have had my money by now but they keep altering things. They lie and cheat all the way and you take out one basis and they change the rules again and again. I am so glad I stopped paying into it but I had been so sure that at 55 I could take out the 25% lump sum and buy an annuity and yet again they put that forward to a later date... At this rate I will be 80 and they'll be changing the rules even then to stop me drawing it.