Not my words, but those of Malcolm McLean, senior pensions consultant at Barnett Waddingham.
I first spoke to Mr McLean several decades ago when I began writing about pensions and I have always had the utmost respect for his views. Never one to shoot from the hip, his comments are always considered and balanced.
His concerns – like mine – centre on the new state pension, and the likelihood that many people are operating under a false perception of how much they are likely to receive.
A freedom of information request by a national newspaper revealed that almost two-thirds of people retiring next year will receive about £116 a week as their flat rate pension – a long way short of the £151 they might be expecting.
This is the latest confirmation that what started as a ground-breaking idea is rapidly descending into farce.
What started as a ground-breaking idea is rapidly descending into farce.The new state pension was mis-sold as a concept from day one, and the government has done far too little to correct those early mistakes. Journalists and financial advisers have been left to hunt out the facts while the department for work and pensions has at times batted back attempts to get solid information.
Those planning retirement are fumbling in a fog that makes sensible planning hellishly difficult.
They are told that deductions will be made for the years when they have been contracted out – but there appears to be no simple calculation they can apply to get an idea of how much they will lose.
Surely it would not be beyond the realms of possibility to have an online calculator. Instead we must write to request a forecast – and given previous forecasts there must be some doubt over their eventual accuracy.
Meanwhile, people are cashing in their savings, possibly in the expectation their state pension will be much larger than will be the case.
Do not misunderstand me. I am 100 per cent in favour of the pension reforms.
But the explanation of them and the implementation of the state pension changes have been a complete mess.
_________________________________________________________________
China crisis does not justify annuities
It is always interesting to see how advisers, fund managers and the media react to stock market falls. How do you deliver the bad news while at the same time avoiding panic?
As usual, we have been told that it is only a real loss if you sell, that there could be buying opportunities but that there may be further falls. So plenty of fence-sitting.
One expert who I expect will have put plenty of people’s noses out of joint is the BBC’s economics editor Robert Peston, who appeared to be almost celebrating the mayhem, with scant regard for the effect it had had on his viewers’ pensions.
Some financial advisers have also been gloating on message boards, suggesting that in some way these falls justify the sale of annuities and undermine drawdown.
What nonsense. Occasional stock market volatility is part and parcel of investing and is no justification for tying every investor into a low fixed income for life at retirement.
The best reaction has been the measured communications some advisers have sent to clients. People will understand markets fall, but they do need to be told why it is happening.
________________________________________________________________________________
Money vacates when I’m on my hols
I am considering issuing a warning to investors when I go on holiday. As the stock market began tumbling in the middle of last month I was blissfully unaware while wandering around the stunning Algarve Coast in Portugal.
It is not the first time I have returned from holiday to find myself several thousand pounds poorer.
I am not one of those who checks their phone every half hour while on holiday. I missed the sterling crisis of 1992 when base rates shot up by 50 per cent while I was walking in Scotland.
Then in September 2007 I was having a lovely time exploring around Alnwick when a friend noticed a rather large queue outside a Northern Rock branch.
I am not alone here. A former financial journalist colleague was enjoying a boating press trip at Cowes Week courtesy of Southdown Building Society when her office began receiving calls from panicking readers reporting a run on that very institution. This was in the days before widespread use of mobile phones, so she continued with her relaxing day’s sailing – while Southdown sailed into the sunset.
Tony Hazell writes for the Daily Mail’s Money Mail section. He can be contacted at t.hazell@gmail.com
