Julian Knight: This licence to print money won't put pensioners at their ease
Sunday 08 March 2009
We've heard a lot about how the 0.5 per cent cut in the UK base rate will hurt savers and particularly those who are retired. However, the Government's decision to follow the financial path trodden in the past by the Weimar Republic and Robert Mugabe and in effect print an extra £75bn could have a far more damaging long-term effect on pension pots.
On the day of the announcement, the income earnt on government gilts fell by the largest percentage since Black Wednesday, and analysts Hargreaves Lansdown reckon it will only drop further.
But what does that mean for you and me? Insurers rely on the return they receive from gilts to pay people annuities. So by flooding the market with cash, the Government has dealt a blow to pensions potentially even more damaging than the tax grab by Gordon Brown that hit final salary schemes. When you come to exchange your pension pot for an annuity, you'll get far less bang for your buck.
It has already started. Someone with a £100,000 pension pot a year ago could have expected an annuity income of some £8,000 a year. Today, the same pot will buy around £7,000, and could plunge to £6,000 or even lower.
Making life difficult
I can't help thinking that this is a good time to invest at least a little in an individual savings account. ISAs are tax efficient and there's no need to buy an annuity. The optimist in me thinks that although we may only be entering stage two of the credit crunch – government financial chaos and insurers under pressure – we are a lot nearer the "bottom".
So last week, looking to start saving regularly into a tracker fund, I walked into my local Nationwide and asked to set one up. As a member of the building society, it seemed a convenient option as I wouldn't have to jump through all the ridiculous anti-money laundering hoops. The custo-mer account manager said he needed to do a fact-find to ascertain "what was right for me and my circumstances". I said I knew exactly what I wanted and would he sell it to me, please? No was the answer, unless I made an appointment to see a "super" salesman – who would have probably tried to flog all manner of products.
I left and bought a fund online instead, but why are banks and building societies so incapable of dealing with people who simply want to make their own decisions and their own mistakes? Can you imagine any other business turning away custom like this?
How couples can protect their financial interests when cohabiting
Money alert: Overdrafts at HSBC and First Direct
'Dismal' eurozone data sparks concerns
How to protect your assets if the stock markets begin to head south again
Child Maintenance Service to replace Child Support Agency - but is it better?
- 1 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 2 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 3 James Foley beheading: Fox news presenter Megyn Kelly annoyed by Ferguson update during broadcast about murdered journalist
- 4 Kajieme Powell: Missouri police release video footage of second man killed by officers
- 5 Paul Scholes: Manchester United need five experienced players who can turn round a desperate situation
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Isis threat: Cameron wants an alliance with Iran
Crisis? What crisis? A visiting US doctor gives the NHS a rave review
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Scottish Independence Referendum: Salmond described as 'arrogant, ambitious and dishonest' by Scottish women
iJobs Money & Business
£45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...
£50000 - £65000 per annum: Harrington Starr: Senior Application Support - Fide...
£45000 - £60000 per annum: Harrington Starr: Product Specialist - (Application...
£50000 - £60000 per annum: Harrington Starr: Technical Specialist - (Applicati...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony