Annuities and a question of age
"The first is that investing in annuities is contrary to the interests of a family... in that they are worth nothing when the investor dies. The second reason is simply that annuities are a lousy form of investment."
The main objection to annuities is the fear of dying and leaving a huge amount of money to the insurance company, but this point has sharply divided the government from pensioners.
The government, the Treasury and HMRC have always insisted that a pension should be used for the purpose for which it was intended, that is to provide a pension income.
The thought that investors will use pension funds as a vehicle for passing capital to their family after their death is not always popular with politicians.
The second point, that annuities are a lousy form of investment, is simply untrue.
I will spare you the boring stuff about high yields and mortality cross-subsidy and simply remind readers that the only alternative to annuities is drawdown (taking an income directly from a pension fund) and many investors saw the value of their drawdown plans falling as a result of the credit crunch and volatile equity markets.
