DIY Investor Magazine
/
2015 Issue
17
GOOD NEWS FOR DIY INVESTORS?
So, it’s all good news then? Freed from the requirement
to purchase an annuity millions of DIY investors will be
taking responsibility for their income in requirement,
their number swelled by the estimated five million
individuals that are saving for retirement for the first time
courtesy of auto enrolment?
Unfortunately it may not be that simple; stagnant
wages, low investment returns and increasing longevity
have made it harder than ever to invest for retirement.
A recent survey suggested that just one in three will
achieve the benchmark of two-thirds income that is
considered necessary for a ‘comfortable’ retirement.
With more choices to make than ever it is vital that
the DIY investor makes time to take stock, consider
their income requirements in retirement and map out
an investment strategy that delivers risk and reward
according to their individual preferences.
There is no doubt that some will opt for fast cars and
a champagne lifestyle; some may even squander
their hard-earned. But for those prepared to invest
some time there has never been more education and
information available to those wishing to take personal
control of their retirement.
However, a year after these sweeping changes were
announced, there are still concerns that many will not
be in a position to benefit. Recent research for Xafinity
suggests that only five percent of pension schemes
will allow investors to take a lump sum whilst others
will allow a withdrawal only after funds have been
transferred to an alternative scheme, thereby potentially
attracting fees and penalty charges of thousands of
pounds.
Full flexibility may be a stretch for companies with
systems that do not allow them to operate as surrogate
banks, but the imposition of additional levies in order
to allow the investor to take the control of their finances
that legislation allows does not seem in the spirit of
‘Treating Customers Fairly’.
‘A RECENT SURVEY SUGGESTED THAT JUST ONE IN
THREE WILL ACHIEVE THE BENCHMARK OF TWO-
THIRDS INCOME THAT IS CONSIDERED NECESSARY
FOR A ‘COMFORTABLE’ RETIREMENT
At the time DIY Investor Magazine voiced its concern
that the much vaunted Pension Wise service may not
be in place in time to cater for the estimated 300,000
pensioners in DC schemes that could apply to it
each year, and that is a concern that has proven well
founded as access to advice remains inadequate.
However, with just under two weeks to go before
‘P-Day’ the Government’s Pension Wise service has
finally announced that it is open for business – 030
0330 1001.
The predicted thousands of those between 55 and 64
currently considering cashing in a DB scheme would
be well advised to think long and hard before they
opt out of a guaranteed, inflation linked pension that
also covers their partner. The FCA estimates that the
average cash value of a transferred out scheme will be
£140,000 but that 40% of those opting out would be
‘irreversibly’ worse off and in some cases ‘left destitute’
in old age.
Overall it has been predicted that £6 billion could be
withdrawn from pension accounts and therefore it is
unfortunately inevitable that there will be fraudsters and
conmen touting the ‘too good to be true’ investment
opportunity. DIY investors know that it will be.
One commentator likened this April to the pensions
industry’s Y2K – whilst it may be impossible to prevent
fools acting the fool, DIY Investor Magazine will be
there to help and educate those that are taking a long
term and circumspect view.
