In an astonishing outburst at today Play Pen London lunch, pedagogue David Hargreaves bit the hand that fed and claimed that the predicament at retirement was down to the financial services industry.
Hargreaves, an actuary who trades as the pension school told the stunned luncheon group that
“everyday people didn’t trust pensions, insurance companies, annuities or advisers for that matter”.
His stunned audience listened on in horror as he told them his research had shown that were it not for financial services companies, people would have loads of money in retirement and would be a whole lot happier.
“something must be done about this man”,
claimed one luncher
“if this gets any further this’ll be the last Fullers Special Pie we’ll be gulping down for a while”
……
“I nearly choked on my bangers and mash”
spluttered another
“with honesty like that where would we be”.
Hargreaves left the room to a tumultuous reception from the awaiting hordes at the bar.
To a rousing chorus of
“We love you Hargreaves, we do..”
the balding Lothario was chaired head high down Cornhill to the Bank of England where he was installed as interim Director.
English: Photo of Bangers and mash, taken with a Casio EX-Z3. Copyright avlxyz. Mac’s Hotel, Melbourne, Australia. Deutsch: Bangers and mash – ein englisch-irisches Gericht aus Bratwürsten und Kartoffelbrei. (Photo credit: Wikipedia)
Other diners
included
Alan Higham, Henry Tapper, Terri-Ann Humphreys, David Taylor,Andrew Clotworthy, John Mather,Kath Oxenham, Jeremy Spencer,Alison Hollis, Clive Warlock,Paul Speight, Vivi Friedgut, Kim Goodall
The Play Pen voted on
“whether we were doing enough for people at retirement”.
The Pen voted 12 to 1 that “we weren’t”, the exception being John Mather who said that “he was”.
The next Play Pen London lunch will take place on Monday March 4th and will be accurately reported (for a change).
Related articles
- Seven in 10 private sector workers have no pension (telegraph.co.uk)
- FSA to investigate pensions annuity market amid fears (independent.co.uk)
- “Pensions aren’t dead yet!” January pension play pen lunch (henrytapper.com)
- Third of workers with no pensions unconvinced by auto-enrolment (thisismoney.co.uk)
- Vertical disintegration (henrytapper.com)
- Pensions dead by 2050 – taking the Michael? (henrytapper.com)
- FSA launches review of pension annuity market (guardian.co.uk)
- Inflation calculation move looms (bbc.co.uk)
A slight caricature of reality but I do take your point.
I would however urge anyone interested in pensions to perform a couple of back of the envelope calculations:
1) If a 65 year old man with a 35 year old son equity releases his house and buys an annuity. and the son saves the same amount (net) of the annuity into a pension and then buys an annuity 20 years later when the (then 85) year old dies – how much pension does he get. Compare this with 35 year old just gives 65 year old dad the same amount in pension, inherits the house and rents it out.
2) A 65 year old retires with an annuity on £10,000 from a personal pension and a state pension of £7,000.
a) how much tax will he pay per year
b) What was his pension pot to produce this pension
c) How much was he paying in fees per year before retiring assuming 0.8% platform fee, 1.5% AMC and 1.2% hidden charges.
3) You have a mortgage on a £200,000 property at 4.7% (base rates are 0.5%). You are also trying to save £200,000 for a £7,000 pension at age 65. Roughly half way through you have £100,000 in pension fund and owe £100,000 on your mortgage. Calculate how much you are paying in banking fees (interest minus base rate) and pension fees (as in question 2). This is a fee what what exactly
We often talk in generalities – but you have to do some numbers for the scales to drop from your eyes. many of these astronomical costs are avoidable. The assumptions required in the above calcs are readily available from the interenet and don’t require masses of actuarial jiggery pokery.
1) you can pay off mortgage before saving for pension
2) you can go passive
3) you can do equity release within the family (albeit with proper contracts)
4) You can step sequentially up the housing ladder rather than saving a bit deposit to go straight onto the housing ladder at a high level. (Massively reduces mortgage costs – think of the area of triangles)
David Hargreaves
In many respects, I’m with David. As usual, I wish I had been there and sorry I wasn’t. But I think you also have to add state systems into the equation, and ask which people, which types of people, and how many. Especially with historically low annuity rates not rising anytime soon. If a pay as you go state system can more or less keep track with GDP at pretty low cost, would more people be better off now and in the foreseeable future if we had gone this way over the last 60 years? These questions of privatisation, regulation and economic efficiency are also becoming fundamental to the social care and possibly health systems, all affecting well being in later life.
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