Pension income choices manna for unscrupulous

Sandra Chapman
Sandra Chapman

In a little over a year’s time those pensioners with existing annuities will be able to enjoy the same privileges granted to those coming up to retirement who haven’t yet chosen how to provide their income for the future.

Unlike my generation they will not be forced into taking out an annuity and will be able to spend their money as they please.

Pensions

Pensions

What is planned for annuity holders like myself is the freedom to cash in what’s left of that lump sum and blow it whatever way we like. Annuities were once a great option and if you had saved £100,000 in your pension pot you could have had an annual income of around £15,000 a year plus your state pension. When the stock market crashed some years ago this changed to plunging rates and if you were lucky you got somewhere around £6,000 instead of £15,000. One of the problems at that time was people about to retire had no choice but to take out an annuity such were the government controls.

The coalition has decided to abandon such controls leaving many to suggest that pensioners would blow the lot on luxuries leaving them impoverished in later life. The Chancellor George Osborne thinks this is a ‘very patronising attitude’ and retired pensioners should have the same choices as those about to retire. And this is where the image of a scorpion comes in.

Anyone trying to withdraw money from their private pension/s from April will receive leaflets embossed with a scorpion. The creature represents the many scams the government expects will be established as fraudsters lined up to relieve financially un-savvy pensioners of their hard earned savings.

Those leaflets will be coming in through the relevant post boxes soon as it is expected that as many as 500,000 people may withdraw money from pensions once the new rules come into force. There are many obvious pitfalls facing pensioners with choices.

Experts have estimated that as much as 50 per cent of the remaining annuity fund could end up being taxed in one form or another. In fact I’m suspicious enough to ponder if the whole idea of having so much money sloshing around suits the government as it would give the economy an instant boost.

On the other hand being able to cash in an annuity would give the retired an opportunity to increase their income every month, if they went into the property market like so many do in the TV programme Homes Under the Hammer. We have to assume, of course, that the property market continues to grow along with the rental income. It’s not a risk-free business to become involved in.

For the moment I will keep my annuity where it is as I quite like the idea of my coffers being added to every month with a particular amount without me having to lift a finger. The idea of trying to make my money work to increase that monthly amount leaves me tired just thinking about it.

The scoundrels who helped send the stock market plunging nearly a decade ago are still around could do the same again. We can be certain of nothing in today’s global economy. Playing safe therefore would be no bad thing.