Cup of tea ends with a sour taste

Fifteen leading providers are signed up including Pearl, Prudential, Norwich Union and Legal & General.

It is particularly interesting to see Pearl signed up because research from Hargreaves Lansdown published earlier this year showed that Phoenix, which is owned by Pearl, was by some way the worst for coughing up annuity cash.

It was at the time taking an average 61 days to send the money and has deteriorated considerably since 2007. So there is considerable room for improvement.

This has been a long haul and it is not over yet. Some firms, such as Royal London, have yet to sign up. And all we have are promises of improvements to come.

But at least there now seems to be a collective will to get things right. Let us hope that results follow swiftly.

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Wouldn't want to be in your shoes

Who would be a pension fund trustee? asks Professor Andrew Clare of Fathom Consulting and the Cass Business School at City University London.

The roller coaster stock market conditions of the past few years will have sent many scrambling for cover. He took a hypothetical scheme that at the end of 1996 had assets that were worth only 90 per cent of the value of its liabilities.

If the fund was 60 per cent in shares with 20 per cent equally in gilts and sterling corporate bonds, it would have been in surplus in June 2007 but would now have only 71 per cent cover.

Swop the position to put just 40 per cent in shares and it would have remained in deficit but would now have 82 per cent of its liabilities covered.

Professor Clare predicts that trustees will increasingly lean towards bonds for their added security. That will have implications for investors because any significant recovery in share prices could see pension funds scrambling to sell, which will snuff out rallies sooner that would otherwise be the case.

This is yet another issue for private investors to take on board. If pension funds were to lose their appetite for shares over the longer term it would have serious consequences for share values and would make them look far less attractive to small investors whether or not they are committed for the long term.

Email:t.hazell@gmail.com