Never mind UK pension annuity rates; pension funds are inadequate as savers lose faith in insurance companies due to higher charges and a long history of poor investment fund performance, according to experts. This damning verdict, put out by Robert Reid, a leading financial adviser and also the former president of the Personal Finance Society (PFS), comes on the back of a £6.7 billion fall in sales of pension plans, insurance and investments. The gloomy figures, published recently by the Association of British Insurers (ABI), compared sales by its member companies for the three months to the end of September this year with the same period last year. Pensions expert Dr Ros Altmann, an individual often mentioned in these articles, says the dramatic drop in pensions shows that there are people who no longer think pensions work.
Lump sum payments into pension plans and other insurance company savings arrangements, such as investment bonds, endowments and Isas, fell by 41% from £15.9 billion last summer to just £9.4 billion this year. The amount of new cash going into personal pensions alone has dropped by almost 25%, from £5.2 billion to around £3.91 billion. The ABI blames the ongoing economic downturn, arguing that cash-strapped investors are focusing on repaying their debts rather than saving for their retirement. But the slump in sales by insurance companies is in stark contrast to the record sales of about £21.1billion announced by the Investment Management Association (IMA), which monitors overall sales of unit trust Isas. So, money is being saved, but not in pension funds, which means that when retirement arrives for many they won’t have enough funds to buy good UK pension annuity rates with. I only hope they have sufficient alternatives to support their retirement incomes.
