Connect with us

Investing

TWO-THIRDS OF RETIREES PASSING UP HIGH PERFORMANCE ANNUITY OFFER – ARE YOU ABOUT TO BECOME ONE OF THEM?

Published

on

TWO-THIRDS OF RETIREES PASSING UP HIGH PERFORMANCE ANNUITY OFFER – ARE YOU ABOUT TO BECOME ONE OF THEM?

Thousands of retirees each month are shunning high performance pension incomes in favour of higher risk and lower returns, says specialist financial services company Just Retirement.

 More than a million saversI have pension plans that offer a guarantee to pay an income for life that is between 5 and 10 times the return paid by even the best savings accountsII. But official figures show that nearly two-thirds of the people accessing pension money whose plans include a guaranteed annuity rate are choosing not to take it upIII.

 Despite that, recent research suggests a third of people taking cash from pensions are stashing it in savings accounts currently paying rock-bottom ratesIV.

 “If you are one of those aged over 55 who is thinking about taking some pension cash from a plan offering a generous guaranteed rate for life then you are very lucky – only about one in eight have this high performance option and giving it up could prove an expensive mistake,” said Stephen Lowe, group communications director at Just Retirement.

 “When we researched what people could receive from a guaranteed annuity rate the typical income paid was between 9 per cent and 12 per cent but in some cases it topped 14 per cent. Pension providers made these promises when rates were higher and now have to honour them – their loss can be your gain.

 “In fact the guarantees are so valuable that providers must tell you if your pension plan has one and, with bigger pension pots, you are compelled to take regulated advice if you are thinking of giving it up.

 “Yet we know that many thousands each month are turning these high performance annuities – of those accessing pension benefits in the last three months of 2015 for example, more than 9,000 of the 15,000 whose plans offered a guarantee rate chose not to take it upIII.”

 He said that rejection was far more likely among those with smaller pensions. Nearly nine in 10 of those with pensions worth less than £10,000 shunned the guaranteed annuity rate compared to about four in 10 of those with larger pension funds who have taken professional advice to explore which options are best for them.

“Pension choice only works if people are open-minded and think about all the options,” said Stephen Lowe. “It’s true that in the past customers who didn’t shop around often ended up with poor value annuities. That doesn’t mean people should automatically ignore all annuities.

“Some people have these very attractive guarantees rates. Many thousands more can access higher, personalised plans that take into account health and lifestyle factors and can be bought with capital protection built in to ensure a positive return on the money invested even if you don’t live to a great age.

“The key point is to thoroughly check the facts by finding out what annuity rate would apply to you and then to use that as a benchmark to test other options. You may be surprised.”

He said that being able to decide what to do with our own pension money is popular but also comes with responsibility to ensure we choose wisely by prioritising income over the long term.

 “Most of us will need a firm foundation of guaranteed income from State and private pensions that we can use to pay the bills when we are no longer working and which we can rely on even in if the economy runs into problems. Once that is in place we can think about having some flexibility so we can spend, invest or give away the rest.

 “True pension freedom is being able to use the pension money you have today knowing with certainty that more is on the way tomorrow and for as long as you need it.”

Investing

Are clients truly getting value from their BR solution?

Published

on

Are clients truly getting value from their BR solution? 1

By Matt Dickens, Senior Business Development Director at Ingenious

Financial planners and wealth managers strive to deliver on the needs of their clients by always providing the most suitable and effective advice. But as with any service, this advice should also be delivered at the best possible value for the investor. Value can be simplistically defined as the service that delivers the most benefit, balanced against the financial cost, but in the estate planning space, how do you assess what good value is?

1. Total fees and charges

Product fees are guaranteed to negatively impact returns, so it is important to minimise their impact when looking to gain the best value from the investment. Some managers report little or no fees paid by the investor to the manager, but instead charge the company or investment service itself. While this might initially be seen as better value for the investor, it is not as simple as that. Investors in unlisted BR services become a shareholder of the portfolio companies, so the reality is that any fees paid by the companies are effectively being paid by the shareholder (or investor). Therefore, both investor fees and company fees will both negatively impact the final return and must be considered together.

Analysis of what a manager is paid by the investor and by the company over a significant period will enable an adviser to conclude if the manager is offering good value, or if a disproportionate amount of fees is going to the manager at the expense of their investors.

2. Real investment returns

Another key component of assessing value is what the investment actually delivers. For BR solutions, investors’ main objective is commonly to pass on the maximum sum possible to their beneficiaries upon death. This may lead to a conclusion that delivering Inheritance Tax relief at the lowest possible cost is the primary driver of value. However, especially for clients with longer time horizons, the one-dimensional goal of avoiding a potential 40% Inheritance Tax bill can easily over-shadow the equally important goal of aiming to steadily grow the investment, preventing erosion by inflation, drawdowns and investment fees. Unlike some IHT-focused solutions, such as trusts or gifting, investors in BR services do not have to accept zero growth of their wealth from the point of investment.  Instead, investors can continue to earn returns, either taking an income stream or increasing the final sum to be passed onto their beneficiaries, precisely in line with their original objective.

While most BR managers predict their ongoing returns at a certain level, those targets are not guaranteed and historic performance varies widely.

3. The relationship between fees and risk

Given that the majority of managers in the BR space state their performance targets net of fees, to produce positive growth and achieve their target return, those managers must first earn back any fees they are taking. Let’s take the below scenario to illustrate this point.

 Are clients truly getting value from their BR solution? 2Manager 1

Annual performance target, net of fees: 3%

Annual fees: 3%

Gross performance target: 6%

 

Are clients truly getting value from their BR solution? 3Manager 2

Annual performance target, net of fees: 4%

Annual fees: 1%

Gross performance target: 5%

Initially, it might appear that Manager 2 must be taking more risk to target a higher net return of 4% than Manager 1, who is targeting 3%. However, Manager 1 has to deliver an additional 2% of gross return than Manager 2, to make up for charging higher fees. Higher fees not only impact returns and value, but they can also mean greater risk.

Market comparison

In the Tax Efficient Review’s most recent analysis of Unlisted BR Services1, they released data that ranks services in the market in terms of both investor returns and total fees. IEP Private Real Estate achieved the top rank for returns delivered, with the second lowest total fees in the market, demonstrating that it represents attractive value for investors in comparison to other services.

Continue Reading

Investing

Reuters Events Launch Global Investment Summit Online Edition Uniting Institutional Investors, Asset Owners & Financial Institutions

Published

on

Reuters Events – today announced the agenda for their Global Investment Summit (Dec 3rd -4th). The 2-day strategic summit has been reimagined in the era of social distancing and will be broadcast free of charge to the public.

This Summit, with a diverse range of international voices and anchored by Reuters News-led sessions, is the only place for institutional investors, asset owners and financial institutions to come to terms with the events of 2020.

Click for more information and for complimentary registration to the online edition

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Eileen Murray, Chair, Finra
  • Philip Lane, Chief Economist, European Central Bank
  • Gregory Davis, Chief Investment Officer, Vanguard
  • Hanneke Smits, CEO, BNY Mellon Investment Management
  • Pascal Blanque, Chief Investment Officer, Amundi
  • Desiree Fixler, Group Chief Sustainability Officer, DWS
  • Joe Lubin, CEO, Consensys
  • Bahren Shaari, CEO, Bank of Singapore
  • Mark Machin, CEO, Canada Pension Plan Investment Board

The agenda released by Reuters Events Investment is both ambitious and comprehensive, and will cover four key themes: Market Outlook, Asset Management Strategies, Industry Deep-Dives and the Future of Investment.

View the full agenda here

Continue Reading

Investing

Halliburton & Baker Hughes CEO’s join Reuters Events: Energy Transition 2020

Published

on

Reuters Events – today announced that CEO’s of two of the world’s leading energy service companies, Halliburton and Baker Hughes, will join the speaker faculties for their flagship Energy Transition Summit.

The event will explore the creation of the future energy ecosystem and offer companies, from across the asset spectrum, a definitive guide to their net-zero strategies. The alignment of the two biggest O&G global service companies, Halliburton and Baker Hughes, represents a significant step in the transition to low-carbon energy

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Alongside their CEO speaker representation, Halliburton join as Platinum sponsors of the North American edition. Baker Hughes join as gold sponsors for the European edition of the flagship energy transition program.

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Lorenzo Simonelli, Chairman & CEO, Baker Hughes
  • Jeff Miller, CEO & President, Jeff Miller
  • Tristan Grimbert, CEO, EDF Renewables
  • John Pettigrew, Chief Executive, National Grid
  • Pratima Rangarajan, CEO, OGCI Climate Investments
  • Alex Schneiter, CEO & President, Lundin Energy
  • Gretchen Watkins, President, Shell Oil Company
  • Calvin Butler Jr., CEO, Exelon Utilities
  • Francis Fannon, Assistant Secretary ERB, S. Department of State
  • David Lawler, Chairman & President, bp America
  • Andreas Schierenbeck, CEO, Uniper

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Governance & Cooperation – Does the energy transition face a ‘governance deficit’? To understand how the energy transition will develop over the next decade, it is crucial to understand the driving governing forces behind it. Will the Green Deal provide the first domino, how can we ensure progress in the shadow of Aberdeen and ensure that we translate targets into action?

Financing Energy Transition – We must address the elephant in the room; who is going to pay for it all? An understanding of where the funds are likely to come from is key to staking claim to the infrastructural projects that will redefine the modern world in the 21st century.

New Energy Infrastructure – Low-carbon energy supply and consumption will need a radical overhaul of infrastructure. As well as revamping the old, we’ll need entirely new assets and new systems of energy delivery. It’s an unprecedented opportunity with estimated spending at $70 trillion over the next decade. Knowing which technologies are ready to be scaled first is the key to understanding opportunity

Business Model Innovation – Who will provide leadership through the age of transition and how do we want our future energy system to look? Speed and timing will be crucial if you are to stay on the right side of the transition. Join us in setting business led, evidence based, targets as industry drives towards net-zero

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

At Reuters Events, we’re committed to tackling the Energy Transition head on; to shed light on the defining issue of our time and help energy companies meet a uniquely difficult challenge. That is, to be both an energy company of today, and the energy companies of tomorrow. In a period that will be defined by uncertainty we can, together, lighten the way forward.” – Owen Rolt, Head of Energy Transition, Reuters Events

Contact

Owen Rolt

Head of Energy Transition

Reuters Events

UK: +44 (0) 207 375 7596

E: [email protected]

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2020
2020 Global Banking & Finance Awards now open. Click Here

Latest Articles

Entersekt provides clarity on Secure Remote Commerce authentication techniques for financial institutions 4 Entersekt provides clarity on Secure Remote Commerce authentication techniques for financial institutions 5
Technology11 hours ago

Entersekt provides clarity on Secure Remote Commerce authentication techniques for financial institutions

New whitepaper from Mercator available: Revisiting Authentication in the Age of SRC and EMV 3-D Secure Is it time for...

Thinking Long-Term When Your Shareholders Won’t Let You 7 Thinking Long-Term When Your Shareholders Won’t Let You 8
Business12 hours ago

Thinking Long-Term When Your Shareholders Won’t Let You

By MaryLee Sachs, US CEO, Brandpie In a recent study of nearly 700 CEOs across the US and Europe, my...

Are clients truly getting value from their BR solution? 9 Are clients truly getting value from their BR solution? 10
Investing12 hours ago

Are clients truly getting value from their BR solution?

By Matt Dickens, Senior Business Development Director at Ingenious Financial planners and wealth managers strive to deliver on the needs...

New TransUnion Study Finds Smooth Digital Transactions “Essential to Business Survival” During and After Pandemic 13 New TransUnion Study Finds Smooth Digital Transactions “Essential to Business Survival” During and After Pandemic 14
Business15 hours ago

New TransUnion Study Finds Smooth Digital Transactions “Essential to Business Survival” During and After Pandemic

Economist Intelligence Unit report for TransUnion highlights the crucial role emerging technologies will play in balancing fraud prevention and customer...

How technology has made us communicate better in crisis 15 How technology has made us communicate better in crisis 16
Business17 hours ago

How technology has made us communicate better in crisis

By Pete Hanlon, CTO of Moneypenny COVID-19 has taught us a lot. We have embraced technology, some might say, survived...

Futureproofing Your Credit Management Now 17 Futureproofing Your Credit Management Now 18
Finance18 hours ago

Futureproofing Your Credit Management Now

By Marieke Saeij, CEO, Onguard The pandemic has forced a shift in day-to-day operations for the majority of businesses. In...

Will covid-19 end the dominance of the big four? 19 Will covid-19 end the dominance of the big four? 20
Top Stories1 day ago

Will covid-19 end the dominance of the big four?

By Campbell Shaw, Head of Bank Partnerships, Cardlytics Across the country, we are readjusting to refreshed restrictions on our daily...

Why cybercriminals have ‘Gone Vishing’ during the COVID-19 Pandemic 21 Why cybercriminals have ‘Gone Vishing’ during the COVID-19 Pandemic 22
Business2 days ago

Why cybercriminals have ‘Gone Vishing’ during the COVID-19 Pandemic

More than 215,000 vishing attempts in the last year alone As new coronavirus restrictions look set to confine much of...

Risk Mitigation vs. Risk Avoidance: Why FIs Need to Maintain Risk Appetite and Not Place All Bets on De-Risking 23 Risk Mitigation vs. Risk Avoidance: Why FIs Need to Maintain Risk Appetite and Not Place All Bets on De-Risking 24
Finance2 days ago

Risk Mitigation vs. Risk Avoidance: Why FIs Need to Maintain Risk Appetite and Not Place All Bets on De-Risking

De-risking aims to protect financial institutions from the increasing pressures placed by regulators and threats, associated with clients operating in...

Using AI to identify public sector fraud 25 Using AI to identify public sector fraud 26
Technology2 days ago

Using AI to identify public sector fraud

When it comes to audits in the public sector, both accountability and transparency are essential. Not only is the public...

Newsletters with Secrets & Analysis. Subscribe Now