e-mail Paul LewisDear Listener
Annuity
rates have been tumbling recently. They are linked to the return on Government
bonds and as the
So
people retiring are looking for alternatives. Unfortunately, the main
alternative is even worse. Drawdown allows you to take money out of your pension
pot without buying an annuity. If you have more than £20,000 of other,
guaranteed pension income then you can take any amount out – though it will be
taxed. But if you do not have that much other pension income you are limited to
taking out a set amount. That is also related to the return on UK Government
bonds and forecasts of longevity and for both reasons the arithmetic has turned
against drawdown. In addition from April the Government changed the formula to
reduce the amount that could be drawn down by about 17%. The result is that the
amount that can be drawn down – which was always considerably more than the
amount paid by the best annuity – is now slightly less. And that is before
counting the charges made by the drawdown provider which will take around 1% to
1.5% a year off your pension pot even if no investment advice is given – and
whether it grows or shrinks.
So
drawdown for anyone who does not have that £20,000 or more of other guaranteed
pension income is becoming a very unattractive alternative.
***IN
MONEY BOX THIS WEEK***
Thomas
Cook shares have rallied a little – now around 20p having closed at 10.2p on
Tuesday (they were £2 in January) but cautious customers will still want to be
clear about how safe their holidays or vouchers are if worst comes to worst and
the company does not get the second lot of £100mn which it has asked its banks
for. We will explain what’s safe and what’s not.
We got
a huge response to last week’s story about the baby whose account with NatWest
was closed peremptorily on false grounds of fraud. It now seems that an alarming
number of adults are being left in limbo by a number of banks – unable to open
an account with any bank but unable to find out why or challenge the decision.
The
housing minister explains his new scheme to indemnify lenders against some of
the loss on 95% mortgages on new build homes for first time buyers. And he gives
us a commitment that the interest rate charged on these 95% mortgages will be
more like the rate charged on 80% loans.
Are
your savings in a zombie account? One which is sort of alive but pays a dead
rate of interest – below 0.1%? If so you might be helped by a new website
www.savingschampion.co.uk which
lets you check what your account is paying and find a good place to move your
money to.
And new
protection for 5 million people who use a MasterCard debit card if what they buy
goes wrong.
We hope
we can squeeze those five top stories into 24 minutes of prime time Radio 4 on
Saturday at midday. If you miss it then catch the repeat at 9pm on Sunday or of
course listen online anytime
www.bbc.co.uk/podcasts/series/moneybox.
There
is more information on these stories on our website
www.bbc.co.uk/moneybox where you can also download transcripts and send us
ideas or problems you want us to look into. And why not Have Your Say on zombie
savings accounts – the page is up now
http://news.bbc.co.uk/1/hi/programmes/moneybox/9647739.stm.
This
newsletter is available at
bbc.co.uk/moneybox/newsletter around the time it hits your inbox (tell your
friends who don’t subscribe). And you could join more than 15,000 people who
follow me on Twitter to enjoy (or rant about) my random but timely thoughts on
money and a few other things whenever I’m awake at
twitter.com/paullewismoney.
Money
Box Live on Wednesday at 3pm with Vincent Duggleby is on the personal finance
implications of the Autumn Statement.
Best
wishes,
Paul
PS I
will be on BBC One Breakfast on Saturday trailing one of our stories. And back
on Breakfast later in the week, probably on Thursday and usually around 0640 and
0820 talking about a money story and answering emails and tweets. But the time,
and occasionally the day, can vary.
e-mail Paul Lewis