Budget 2014 - watch with us!

[SarahMumsnet]

So... George Osborne will be standing up to deliver this year's Budget at 12.30pm, with announcements expected on property tax, stamp duty and the personal tax allowance. Here's what you were hoping (and dreading) would come up; time to find out whether George has been reading

We'll be watching the Budget over here and posting about the key announcements for those who are at work unable to view the live stream; come join us, and tell us how you think he's doing ...

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.

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.

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

"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"

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.

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.

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

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?

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.

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.

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.

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.

Look lets just agree to disagree eh? I probably shouldn't have got involved in this thread - I've spend most of the day looking at stuff related to annuities and because of my job I do have a lot more knowledge of how annuity pricing works and what is really involved behind the scenes. Some of the comments and reporting I have read tonight (not specifically aiming at you) have been quite frustrating for me as many are just riddled with inaccuracies.

Sometimes you get fed up of your entire industry (and everyone in it!) being painted as evil when you know most of it isn't true and that a lot of it boils down to lack of understanding (again, not you specifically)

SC, you can already withdraw (and pay I think it is 50% or 55% penalty) on the 75% which is not withdrawn in cash as a lump sum tax free (25% is tax free). This is moving down to your upper marginal rate so if someone withdrew say £400k in cash at 55/57 £100k is tax free and £300k is subject presumably to 45% tax. So not too different when you get into the details of it unless they mean you work out that person's tax rate in that year eg. 20% and they get £300k taxed at 20% which the budget speech might have implied or more likely for people with bigger funds they are paying 40% or 45% upper rate already so still about half or nearly half if confiscated if you choose to take it in cash. This is relevant to me as I wanted to do that at 55 coming up but will just buy the annuity if the tax penalty for taking all in cash is too high.

On whether annuities are worth it a lot of us only draw out what we pay in as we have had so many years with very low returns on shares and savings are female and will live 30 years into retirement (I will work until I did so stopped paying into a pension 10 years ago and just want to take the money and run now).

I don't agree that higher charges always mean you do worse however. Higher charges if the fund is making massive profits are absolutely fine. You get what you pay for. Pay peanuts and you get monkeys. Although if you pay massive charges and those choosing the investments are useless too that's lose lose. I have managed my own SIP for years as I like the control over choosing the shares in it.

Jane the average pension pot isn't all that large at the moment - nowhere near the hundreds of thousands mark AFAIK. I'm also seeing a lot of chat suggesting that you might well be able to draw the money out piecemeal so you could find people wind up not paying that much tax and nowhere near 55% which is the current tax rate for excess withdrawn.

With regard to whether annuities are good value - the investment returns you had on your pension during the savings period aren't relevant. They're a separate product. Gender has no impact on annuity prices so they're generally speaking better value for women as we live longer on average.

So you would if you were still working full time/had a business etc need to make sure in one year your income was kept to 20% tax rate levels, draw out the whole sum of say £400k, £100k tax free and pay 20% tax on the £300k. If instead your marginal tax rate is 40% or 45% ( am talking about everyone I know here as we are all h igh earners, whether male or female so I accept we are not typical) then all the state is giving you is a 10% difference from 55 - 45% penalty - a bit of a boost, but not much.

I found the bit I was looking for about whether I can still take the money and run aged 55. I can but not everyone will:-

“Finally, hidden away is the increase in minimum pension age from 55 to 57 from 2028 with minimum pension age being linked to state pension age going forward. There have been calls for earlier access to pensions – to help stem the flow of those wanting to liberate their pensions. This goes against those calls but the change is a long way hence. In the meantime, those desperate for extra money will be able to draw extra legitimately from their pension scheme once they reach age 55 (or earlier on ill-health). I wonder if there will be a flow of ill-health requests as a means of liberating pensions.”

I think as you say the situation is a bit more complicated for higher earners with bigger pots but the average pension pot is nowhere near that value.

Jane - I don't think you would pay 20 percent on the 300k. Marginal rate would be whatever your drawdown put your highest income as. So if non pension income was £30k (in the 20 percent band) and you drew out £200k, you would pay some tax at 20percent, some at 40, some at 45.....

Clean Correct.

So reading between the lines, he's capped DLA. Someone tell me I'm mistaken as I can't see how I can be.

My pension pot is £11,000 and growingat diddly squat
because the hidden charges are almost equal to the headline returns

the Pensions industry were told to get transparent and drop their transaction and management rates to comparable with German companies
they didn't
serves them right
they will not get bailed out

No, he hasn't 'capped DLA'. He's set an overall limit for all benefits. So, I imagine the in line with inflation increases will cease if he needs to stay within his set benefits budget.
Anyway DLA is being replaced by PIP over the next few years.

Your pension is not the same as an annuity talkinpeace. If your returns are that poor on your pension then move the damn thing, transfer to a different provider, different product, different fund...Charges on a modern pension product are not difficult to understand.

Charges on a modern pension product are not difficult to understand.
That is not what the FSA found when they started investigating : which is why Gideon made the move he did yesterday