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PRESS RELEASE
Online alliance lobbies the Government to change pension laws
The law forcing British pensioners to purchase annuities at 75 not only makes them much worse-off but also discriminates against their age. In a bid to change the law, CAPPA, Sippdeal and The Motley Fool are lobbying the Government to give pensioners the freedom to purchase annuities when and if they choose to.
Research released today reveals those affected by the law are being encouraged to sign pension contracts binding them to terms they don't understand and that are poorly explained. A staggering 61% of those questioned who had personal pension plans don't even know what an annuity is!
The majority (70%) of those who had signed pension contracts said they were not made aware that they had to use the lion's share of their funds to buy annuities when they reach the age of 75. Since annuities fail to keep pace with economic growth, pensioners' incomes relative to the working population decline each year beyond that age.
When people die, money used to purchase annuities (75% of the total) remains the property of the insurance company and none of it goes to their estate. Although this is clearly of crucial significance to their relatives, an alarming 80% of people who have signed up for these policies were unaware of this when they signed.
Commenting on the survey findings David Berger, Chief Fool, said: "Conventional wisdom says save for your retirement, but there are major drawbacks to personal pension plans and these are not being explained. We are campaigning to get the Government to abolish compulsory purchase of annuities and to change the law so your family rather than your insurance company inherits your savings on death."
A third (32%) of respondents said they thought a personal pension plan was the only option for saving for retirement. Nearly one in ten reached 30 and panicked. Only 16% said they had examined the alternatives and considered a pension plan to be the best option.
How did you get yours?
41% of those with personal pension plans took them out between the age of 25 and 31. Just over a quarter (27%) bought via an IFA, although women (35%) were far more likely to opt for the financial adviser than men (22%). Despite this, men are nearly twice as likely to have taken out a pension than women (41% v 24%).
Taxing issues
According to the survey, people don't understand the tax implications of an annuity, with just over one third of people (34%) correctly stating that income from an annuity is taxed in the normal way, while one in five thought it was actually free of income tax. More than half of those surveyed (52%) had no idea whether an annuity was linked to shares or gilts and 24% thought incorrectly that the return was linked to shares. 95% were unaware that the return is in fact linked to gilts.
What to do now
We urge people to visit www.fool.co.uk, print out and send the prepared letter for MPs -- help with finding out who your MP is is also on the site so it is very easy. There is also plenty of Foolish advice about pension planning and retirement saving on the site in clear, jargon-free language to help people make informed choices and decisions. You can also cast your votes and leave your comments on compulsory annuity purchases at www.sippdeal.co.uk. All comments will be passed to pensions minister Jeff Rooker on Christmas Eve.
Andy Bell, Managing Director and Actuary at Sippdeal, the UK's first online SIPP provider says, "Traditionally there have been two major reasons why individuals haven't taken out a pension plan: The first is excessive charges and commissions which has now been addressed with the introduction of Stakeholder. The second is the requirement to buy an annuity, often at very poor annuity rates. If the Government addresses this issue positively, they will see individuals voluntarily saving for retirement in their masses."
Malcolm Smith of CAPPA (Compulsory Annuity Purchase Protest Alliance) said: "We consider that compulsory annuity purchase at age 75 is contrary to the Human Rights Act 1998. Three responsible working groups have recommended the abolition of compulsory annuity purchase in its present form but the present Government ignores these. The replacement by many companies of final-salary based pensions with money-purchase schemes means many more people will fall into the annuity trap. Annuity compulsion will also apply to the proposed stakeholder pensions. Our website provides full details " |
Notes to editors:
The survey of 1,000 adults aged 18+ was carried out by ICM Research between 24th-26th November 2000. The interviews were conducted across the country and the results have been weighted to the profile of all adults.
For further information or to arrange an interview with The Motley Fool:
• Emily Wintle 020 7465 7744 Emilyw@redconsultancy.com
• Jon Hollett 020 7465 7792 Jonathanh@redconsultancy.com
• M-C Tweedy 020 7465 7738 Mary-clairet@redconsultancy.com