What’s your pension really worth?

Michael Buerk, still working at 67 fronted the Channel 4 Dispatches programme asks what pensions are really worth. The programme which was shown last night can be viewed online. Sadly it was fairly predictable, with headline statements and little helpful information.

The Lifestyle You Want

The programme began asking what three people expect from their pensions – in terms of the income that they need to have the lifestyle that they want, speaking to an “expert” they come up with some rather all-too simplistic “numbers” in terms of how much they need to pay in. This is what I might generously describe as an impoverished discussion. The only message that was conveyed really was that you need to figure out how much you need and start saving early.

Options and Choices

The question was posed about annuities and the appalling number of people that do not shop around for the best deal. I have every sympathy, but also wonder what it takes for people to realise that that they always have a choice. There was a sorry tale of a man that had a small pension pot (£29,000) and he bought a single life annuity from Scottish life, he then died and the annuity stopped. The family were surprised. I have to say that Scottish Life were incredibly generous in offering to alter the annuity to a joint-life annuity retrospectively. Brownie points to them. However some couples really need to think a lot more carefully about decisions that effect them both and not simply leave it to the other to “sort it out”. Which is why I do not see couples separately.

What About Proper Planning?

Despite phoning around, Mr Buerk failed to really communicate the need for expert advice – from a financial planner who would engage with the income requirements into the future and all of the options. Simply phoning around for the best deal is not good enough, it is better, but still grossly inadequate. Ros Altmann’s appearance was all too short, someone that genuinely understood the issues was not given sufficient air-time. This was typical lip service to educational information and rather more to do with headline grabbers.

Pensions Liberation is a Scam

There were further partial truths thrown in for good measure, a brief bit about pensions liberation – which breaches HMRC rules, so I would describe as illegal and yes it is possible to find someone somewhere to arrange one for the right fee (as with anything else). Frankly in the time available it would have been better to have had a separate show for this topic. Pension liberation can lead to complete financial wipe-out. It is a scam.

Pensions v Property (yawn)

So the alternative to pensions? Well thankfully the report didn’t suggest property purchases were the solution (other than the property expert). Property prices are baseless and fuelled by unsustainable debt. There was no mention of taxes, running costs, insurance etc all of which need consideration for using property as an investment. Certainly there is a place for it for some clients, but as part of the solution not the entire solution. In an ideal world your income in retirement is derived from several sources.

Education, Thinking and Planning

The programme ends with the challenge for us all to think about what we need and to consider how we are going to get there. Sadly no mention of the real “experts” to help with this process – financial planners like me. Who are not paid to sell products but to build a financial plan around real lives and real values. I wonder if the Government, regulator and media will ever get it?

Dominic Thomas: Solomons IFA