Pensions Annuity Freedom Prompts Vultures Stock Price Crash - Budget 2014
Personal_Finance / Pensions & Retirement Mar 20, 2014 - 11:59 AM GMTBy: Nadeem_Walayat
George Osbourne announced "Let me be clear, no one will have to buy an annuity. People who have worked hard and saved hard all their lives, and done the right thing, should be trusted with their own finances.", and with that statement the annuities vultures stock prices crashed by as much as 55% as time is now up for all of the pension funds financial blood sucking vampires as illustrated by life time accumulated savings being forced to be converted (lost) into annuities in return for a pittance in annual payments, which was the reason why for so many retirees annuities have amounted to nothing more than a scam where the pensions industry sales pitch promises never materialise.
Before the budget 2014 announcement approx £15 billion annually was effectively being siphoned off by the annuities vampires, now retirees have been given their freedom to choose what to do with their own money!
The pensions vulture industry argument has always been that people are just not capable of managing their own finances and thus all of the money should be given to them in exchange for a few percent of piffle per year. When the truth is that people don't tend to get to 65 WITH sizeable pension funds unless they are capable of managing their finances. Many knew all along that the annuities companies would rip them off but they hoped that the sales pitches would at least partially hold true and not turn out to be as bad as they have been for more than a decade.
Now retirees are FREE to chose what to do with their pension funds inline with their personal circumstances, to draw down as much as they require whilst the remaining fund continues to grow within its tax free wrapper. Off course the income drawn will continue to be treated as taxable earnings
Also, an important reminder is that people can already take upto 25% of their pension funds as a tax free lump sum from the age of 55.
Unfortunately all existing pensioners who have bought annuities will continue to remain victims of the financial blood sucking annuities vampires.
Pensions - What to do ?
In my honest opinion, cash ISA's even before the recent announcement to increase the annual allowance to £15,000 remain the best most flexible form of pensions savings in the UK today despite employer pension contributions. However, there is still a role for pension funds such as SIPP's, especially for higher higher rate tax payers who receive a 40% boost from the tax man on their contributions, its just that even then pension funds should still be seen as secondary to Cash ISA's, which themselves should be secondary to property investments.
For one thing is certain the future is uncertain, and pensions still remain too inflexible for most people to waste putting too much hard earned money into that they may need for instance to buy a home.
More on the Cash ISA's changes here - Budget 2014 Cash ISA Allowance Near Tripled to £15,000, Current Best ISA
Election Boom
In terms of the consequences for the UK economy allowing access to pension fund amounts to the front loading of pensioner spending, as now retirees will clearly have access to far greater funds over the next 10-15 years or so than were ever likely to be available under the annuities regime. This will result in increased investment, economic activity and government tax revenues. However the flip side of the coin is that later on the implications are for the state to pick up a larger bill in terms of looking after pensioners who have fully depleted their pension funds, most probably by the age of 80, so from then onwards the bill is likely to soar and thus prove a far greater burden on tax payers at that time. But in the mean time the UK economy looks set to stat to enjoy at least a decades worth of an ongoing economic boost from extra pension draw downs.
George Osbourne's budget 2014 has clearly been cleverly engineered to appeal to the grey vote in advance of a series of forthcoming elections starting with the European elections in May 2013, Scots choice whether to join Iceland and Greece in September 2014 and then the main event, the next general election of just over a year away when Labour hopes to regain power as long as enough of the electorate suffer from collective amnesia as to just how disastrous the last Labour government actually was.
30 Dec 2013 - UK House Prices Forecast 2014 to 2018, Inflation, Trend Trajectory and General Election 2015
In conclusion a May 2015 general election at an average house price inflation rate of 8.5% would result in a Conservative overall majority of at least 30 seats. Therefore this is my minimum expectation as I expect UK house prices to start to average 10% per annum from early 2014 with my actual forecast converging towards average UK house prices breaking to a new all time high just prior to the May 2015 general election which would be a significant boost for housing market sentiment and thus the Conservative's election prospects.
UK House Prices Boom
The pensions announcement is just the latest in a series of measures aimed at igniting a house prices fuelled economic election boom that dates back more than 18 months (08 Sep 2012 - UK Home Extension Planning Rules Relaxed to Boost Economy, Trigger Housing Bull Market) as now pension funds will be increasingly funneled into bricks and mortar investments such as buy to let rather than be lost in their entirety to the annuities vultures.
UK House Prices Mega-trend Forecast 2014-2018 Ebook
The UK housing market ebook is due be completed by the end of this month (March 2014) that contains extensive analysis and detailed trend forecasts. The ebook also includes extensive guides on how to buy or sell properties, value increasing home improvements, how to maintain and save money on running costs and more - ALL for FREE.
Ensure you are subscribed to my always free newsletter for my latest analysis and to be able to download the ebook for FREE on release.
However, given the time critical nature of the content excerpted analysis including the detailed trend forecasts were posted online in 2 parts on the 30th of December 2013:
- 30 Dec 2013 - UK House Prices Forecast 2014 to 2018, The Debt Fuelled Election Boom
- 30 Dec 2013 - UK House Prices Forecast 2014 to 2018, Inflation, Trend Trajectory and General Election 2015
Source and Comments: http://www.marketoracle.co.uk/Article44894.html
Nadeem Walayat
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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, stocks, housing market and interest rates. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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