The BBC report…
A minority of those aged 55 and over are withdrawing too much from their pension pots, the industry has warned.
However, after the first full year since pension freedoms began, the Association of British Insurers (ABI) said most people were being sensible.
Well over half of those withdrawing money from their pots in the first three months of 2016 took out 1% or less of their value.
But at the same time 3,379 people took out more than 10% from their pensions.
Nevertheless that number is likely to include people who are investing the money elsewhere, or who may have multiple, small pension funds.
“Most people are taking a sensible approach,” said Yvonne Braun, the ABI’s director of policy, long term savings and protection.
“However, the data also suggests a minority are withdrawing too much too soon from their pension pot – 4% of pots are having a tenth or more withdrawn – and many other customers are taking their entire pot in one go.”
The ABI wants the government to investigate why this is happening.
“This is a warning sign that requires further investigation. We need a full picture of these customers’ circumstances and income,” said Ms Braun.
A government spokesperson said keeping their annuity incomes was “the best option for the majority of people” but said that people should have the right to make the decision that is best for them.
To call this a news story, is to stretch things. Most people are sensible and the First Actuarial Muppotometre confirms that only a small number of people are blowing their savings. Similarly a small number of people self-harm, take to drink and wilfully commit crimes.
The news story is in the final paragraph where a Government spokesperson spouts the complacent nonsense that will eventually lead to our next pension crisis, a crisis based on people finding themselves with neither the advice or the management tools to effectively manage their pension pots.
Despite all the talk of pension dashboards, we are yet to come up with an effective solution to holistically managing pension freedoms. The cost of financial products in the retail market remains stuck at around 2% pa (all in) and the Government insists on a market solution (after 150 years of market failure).
No shit Sherlock
Financial Advice- post RDR – is now exposed as a rich man’s plaything. The FAMR is concluding that there is no effective way, in a low interest rate environment for people to use advised drawdown and the algorithm for non-advised drawdown is still a long-way from complete.
The only functioning parts of the pension system are collective. Workplace pensions are working because of employer participation and multi-employer workplace pensions.
The State Pension continues to operate effectively and is the platform for retirement security for those who have worked, paid their NI and not had the benefit of guaranteed pensions from their employers.
When will the Government wake up and smell the coffee?
What is needed – and what middle England is waiting for – is a default way to spend our pension savings that isn’t call “the annuity”.
The ABI do not like collective decumulation because individual members know the value to shareholders of individual drawdown (and of annuities).
The ABI know very well that the mid market needs a collective solution, akin to what it developed (and then screwed up) from with-profits.
Steve Webb , before his defenestration in 2015, got policy through the House of Commons , the Lords and onto the statute book (Pensions Act 2015) which allows people to invest in a collective scheme which distributes income over a lifetime to large groups of individuals mutually insuring each other against living too long.
In life there are only three insurable risks
We can insure against the consequences of dying too soon – and we do using group life insurance (in the workplace)
We can insure against the consequences of long-term sickness and disability – and do so through various income and capital replacement insurances (in the workplace)
We can insure against the consequences of people living too long and do so by savings in the workplace. But unlike death and disability , living too long is not something that is insurable in the workplace. That is the clear message of the demise of the guaranteed retirement schemes known as DB.
Ultimately this is not the employer’s risk to insure, it is a societal risk that puts in jeopardy our health service, our social services and the capacity of a younger generation to work rather than ‘care’.
The only way we can insure as a society against living too long is to save and to use those savings responsibly.
The withdrawal of the State from funding the regulation needed to bring collective “decumulation” products to the market by shelving defined ambition regulatory work (in the summer of 2015) will be looked at as a massive blot on Ros Altmann’s copybook and a failure of vision on behalf of the Government in which she was a cog.
Government – we are waiting – are you listening?
The current solution is to wait till something comes along. The market is supposed to provide. The market has provided nothing.
Pension Wise is a good thing, but it is not a solution in itself, if it cannot signpost any option accept “annuity- advice – cash” then it is failing its users. Currently it has no default solution for the mass market.
Neither the Government or the ABI is moving, the DB structure is crumbling, interest rates are on the floor and so are annuities ( a consequence of Government intervention).
Ironically, equities are flourishing because they are the only place where people can get a long term return. But people are frightened to invest in equities for their retirement because they do not have the means to control the consequences of “pounds cost ravaging”.
There are no quick and easy solutions, there are no Absolute Return Funds (other than in name), risk is endemic in equity investment and can only be controlled through collective structures that provide liquidity at times of market distress and diversification over a wide range of assets. Collectives also provide the means to fund the great infrastructure projects that need Finance,
NO SHIT SHERLOCK
Most of us are sitting on our hands because there is no solution, a few of us are finding new ways to behave like muppets. The Government is waiting for something to turn up and the ABI are calling on the Government to pull another rabbit out a hat.
This hopeless lack of vision is getting us nowhere, it’s time the Government started listening to the Friends of CDC and got back to the Regulatory Drawing Board. We don’t just need a pensions dashboard, we need the means to use it effectively to plan our later years.