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Bbc News: Pensions And Isas Sliced By Market Turmoil

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BBC News: Pensions and Isas sliced by market turmoil

23 September 2011 Last updated at 11:52

The pension income bought from retirement savings has fallen by 14% compared with the start of the year owing to market turmoil, experts say.

The effect of falling share prices and annuity rates means that a 65-year-old's £100,000 pension pot would buy a retirement income that was £926 lower.

The figure, from Hargreaves Lansdown, shows the effect of market turmoil on those with personal pensions in the UK.

Meanwhile, separate figures show how popular shares Isas have also been hit.

A shares Individual Savings Account of £10,000 at the start of the year would now be worth £8,778, a 12.2% fall in value, according to financial information service Moneyfacts.

This would only directly affect people who chose to cash in this investment.

'Turned over'

The turmoil on the financial markets, especially falling shares values, has particularly affected people who have had money saved in personal pension plans and who are now cashing them in to buy an annual pension, known as an annuity.

Not only have some seen their pots shrink, but the annuity rate - the amount of annual pension they can obtain for any set sum of money - has also fallen too.

John Frary from Bedfordshire, a company director in the motor racing industry, had £108,500 saved in his private pension fund.

But between 6 July and 15 August this year that dropped in value by £7,471 to £101,047.

He particularly wanted to use the pension rules to get 25% of that in tax-fee cash for the benefit of his daughters, while buying a pension with the rest.

The fall in his fund values meant that instead of a lump sum of £29,000 he only got £26,500, with a monthly pension of £420.

"That money had just gone in two or three weeks due to a very sharp downturn in a very short period of time," he said.

"That affected me very badly in just a few weeks. I did not want to lose any more so it was time to cash in."

The most recent falls show that waiting another month or so could have pushed down his retirement income even more.

The experience has made him question the whole idea of pension saving.

"I really would be quite cautious about pensions," he said.

"I mainly put money in bricks and mortar and have done better than many friends who ploughed money into pensions over the years - they have been turned over," he said.

Can't go wrong with bricks and mortar innit.

Actually, no you can't. National sovereignty guaranteed. Those clever boomers.

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No mention of how pension annuities have been destroyed by low interest rates then?

I wonder if that clever guy is heavily leveraged in his brocks and mortar or if it is all cash purchases.

Let's see how long his "equity" lasts if when property falls another 10%.

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The problem is QE artificially creating 'demand' for long term Gilts/bonds - therefore reducing their yield - therefore reducing the yield you get on an annuity - as they are mainly based on the yield on long term gilts/bonds.

Really quite simple. Even a muppet like me gets it.

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To be fair the FTSE is about a third less valuable than it was in 1999 and property is selling at about 2.5 times what is was then.

There is no doubt that bricks and mortar has been the better investment, even more so with the tax advantages.

Not saying this is a good thing in case I get banned!

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They seem to be making a meal out of those who are about to retire losing 5% of their pension pot in one day with no time to make it up, but any decent pension company would have their customers in "safe" investments for the last few years for this very reason.

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To be fair the FTSE is about a third less valuable than it was in 1999 and property is selling at about 2.5 times what is was then.

There is no doubt that bricks and mortar has been the better investment, even more so with the tax advantages.

Yep, for the last 10 years property has been a spectacular investment, but I can't see that continuing. At best (for investors) house prices remain at todays levels for a considerable length of time, at worst they tumble spectacularly (reverse for hpc perspective ;) )

I still think a lot of people are going to get burned.

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They seem to be making a meal out of those who are about to retire losing 5% of their pension pot in one day with no time to make it up, but any decent pension company would have their customers in "safe" investments for the last few years for this very reason.

BB,

what are these 'safe' investments, I know them not.

I dread to think what is happening to the deficits on defined benefit schemes. We are going to have companies leaving the UK soon because the cost of maintaining them is too high. The government needs to legislate sharpish and close them all down.

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OMG - my pension is at risk???? :blink:

WE MUST PRINT MORE MONEY AT ONCE TO SAVE OUR PENSIONS!

:lol:

The 'bring back QE' ground-preparation continues apace.

I think that the market is trying to reduce the amount of income paid to pensioners in one way or another. The legislation that ensures pensioners in many circumstances get inflation proofed rises is going to bankrupt anyone having to back that, including the state.

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BB,

what are these 'safe' investments, I know them not.

I dread to think what is happening to the deficits on defined benefit schemes. We are going to have companies leaving the UK soon because the cost of maintaining them is too high. The government needs to legislate sharpish and close them all down.

Basically cash, they called it a security fund.

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Doesnt cash bear an inflation risk and a safety (ie it can be nicked) risk?

You always ask the same question so I shall give the same answer.

We have inflation of day to day items, food, fuel etc. But, the price of big ticket items like houses is falling. If you have substantial amounts of cash earmarked for buying a house inflation is not a problem, quite the reverse.

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You always ask the same question so I shall give the same answer.

We have inflation of day to day items, food, fuel etc. But, the price of big ticket items like houses is falling. If you have substantial amounts of cash earmarked for buying a house inflation is not a problem, quite the reverse.

What you are saying is that the rate of price inflation amongst the things you are looking to buy is overall, static.

What I am saying is that there is a risk that price changes tomorrow might not be as benign as they are today.

A lot of people lost a huge amount of real value from their cash savings in the 1970's.

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What you are saying is that the rate of price inflation amongst the things you are looking to buy is overall, static.

What I am saying is that there is a risk that price changes tomorrow might not be as benign as they are today.

A lot of people lost a huge amount of real value from their cash savings in the 1970's.

Whatever :rolleyes:.

Were you around in the 70s? I was in business during that period and know all about inflation.

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To be fair the FTSE is about a third less valuable than it was in 1999 and property is selling at about 2.5 times what is was then.

There is no doubt that bricks and mortar has been the better investment, even more so with the tax advantages.

Not saying this is a good thing in case I get banned!

Imagine you were writting in 1999. What would you be saying had been the better investment - stocks or property?

Past performance is no guide to future returns and all that.

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Main item on BBC News 24 at 5pm. Para-phrasing slightly "The FTSE went below 5000 but then recovered and the Dow Jones has remained flat."

Then they launch into the pre-recorded piece about pensions and share ISAs.

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Main item on BBC News 24 at 5pm. Para-phrasing slightly "The FTSE went below 5000 but then recovered and the Dow Jones has remained flat."

Then they launch into the pre-recorded piece about pensions and share ISAs.

They said on the radio that £10k invested in the stock market lost 10% today. :blink:

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A long-term fall in pensions is a demographic inevitability as boomers come to retire. It can only get worse for a generation, with the worst-hit being those just (maybe five years or so) the wrong side of that magic birthday in April 1960.

The precipitate speed of the fall - and the inflated pensions of those who got in early - is down to economic mismanagement.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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