It’s the legacy, stupid!

I’ve had some cracking mails and blog comments from those who attended the “Champagne Down the Drain” session at the NAPF on Monday. Thanks to everyone even if you were giving me and Jenny a good kicking!

A f myth seem to be circulating. It’s the ABI‘s myth that the reason we are getting somewhere between 60 and 75% of annuitants claiming not to have shopped around was that they didn’t need to  – they happened to be in the right shop in the first place. I know from speaking with Adrian Boulding that he believes L & G consistently appear as a top annuity payer and clearly Standard Life , the Prudential and one or two others are there or thereabout.

But it’s not the front-line annuity providers who we need to be worried about. Here is a list of personal pension and s226 providers you may have policies with – it’s not exhaustive it’s off the top of my head but if any of these firms are providing top annuity rates or banging the drum for the OMO let them come forward – I suspect that among them are a fair few seal clubbers.

Hill Samuel

Target Life

General Portfolio

Lloyds Life

Merchant Investors

Allied Dunbar

Liberty Life

Irish Life

Save and Prosper

Abbey Life

OK – life’s too short- you get the picture.

Now when Annuity Direct tell me that 85% of the annuities they process have no annuity protection – I KNOW that they are talking about legacy policies form firms such as these which were established on a unit-linked basis and generally invested in “managed” balanced” or “equity” funds.

These policies cover the vast “unwashed constituency of the UK working public who had to rely on coupons in newspapers, direct salesmen, supposedly independent financial advisers or banks and building societies for their pension plans.

Stephen Tyler who runs the Wincanton Transport Pension Scheme points out that nothing is being done about this legacy. Stephen wants to go further than I do and seek restitution for mis-selling. I don’t think these plans were mis-sold, they were generally sold according to the rules pertaining at the time an if the costs of these pensions seem enormous today, they seemed reasonable in those days. Which only goes to show how much we needed the regulations brought in as part of the stakeholder review at the turn of the millennium.

My point, which is different from Stephen’s is that we should not be compounding harm with harm. The policyholders of these plans have already taken a hit of up to 30% on the accumulation on their funds, we should not be allowing them to take another 20% on the decumulation by allowing the plans to be annuitised at rubbish rates.

Instead we should be shouting from the rooftops WATCH OUT! Waving red flags at every pre-pensioner whose doorstep is being besieged by beige envelopes from Zombie-Life  offering default pension conversion offers.

This is what we need to tell our friends, relatives – even the slightly dislikeable (you’d have to hate someone a lot to allow them to be clubbed)

Get onto now. Go to the page and download the guide. I can say this much without giving financial advice, so can pension managers who want to protect their little seals.

This issue is not about the super-duper new workplace savings schemes being set up by Black Rock and Fidelity and Zürich and Standard and Friends and Scottish Widows and L &G and the various SIPP providers. This is about the legacy plans which we have buying over the past forty years which need to be converted to annuities at a rate of some 450,000 a year over the next five or ten years.

The ABI are not talking about these plans, nor about these life companies (which are effectively off the radar). The Pensions Regulator wouldn’t know a capital unit from an accumulation unit ,a seal from a club. The FSA are so busy worrying about the RDR that they’ve forgotten altogether about this stuff – it’s off their watch!

The legacy is today’s problem and it needs dealing with. Thank God we’ve got people like Martin Lewis who are independent enough to recognise that despite this not being trendy it’s important!

If we really care about retirement outcomes, we have to think about this stuff and the £20bn of unclaimed (orphaned) pensions that are hanging around in the back cupboards of life companies and occupational pension schemes alike.




About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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