Julian Knight: When it comes to annuities, an adviser can be invaluable

Many finances can be DIY, but retirement income needs an expert eye

Iam all for DIY family finances – it is part of the reason I started writing about money many years ago. The advice industry has persistently been shown to put the interests of product providers – who on investment sales until recently paid commission – over those of investors.

The number of mis-selling scandals I have written on could fill this column and always at the root has been bad, biased advice. However, this doesn't mean there isn't a place for good advice – a fee-charging independent adviser with the right qualifications, with whom you can establish a long-term relationship, can be invaluable.

One area where I heartily recommend people take advice is when buying an annuity contract to convert a pension pot into an income for life. The problem for years has been that people have simply signed up to the inferior annuity rates offered by their pension provider rather than shop around. Consumers devote 26 times less of their time choosing an annuity than they do Christmas shopping, insurer Aviva's research has found – frankly I'm surprised so much time is spent on an annuity.

So you would think I would welcome Tesco getting involved in annuity sales. In effect, it hopes to bring its supermarket principle to this underserviced, but crucial, market. However, I'm not that enthused.

First, Tesco has been shown to be a purveyor of very ordinary financial products to date, so I'm not sure if it will be able to offer real value. In addition, I think annuities should be an advised purchase. There are all sorts of pitfalls to watch for – such as not buying an annuity that dies with you if you have a partner, or purchasing one which is not protected against inflation when you are likely to live – with average luck – close to a quarter of a century in retirement.

It can be a good idea to have someone qualified to go through some key questions with you. They can spot, for instance, if you have what may seem a relatively mild ailment which could entitle you to a higher annuity because you are likely to live a slightly shortened life than the average.

The more choice the better, maybe, but I wouldn't choose a DIY an annuity, it is too important for that.

Independent pensions dilemma

There has been a lot of talk on whether Scotland would be allowed to keep the pound if it votes for independence next year. But of equal importance is what the new nation would do about its pension funds.

Seemingly, the Scottish National Party's sole economic get-out-of-jail-free card is North Sea oil and gas. Free prescriptions or old age care? The North Sea will pay. A far bigger state sector than England? Again, the North Sea is funding.

However, pensions are as long-term expense as it is possible to imagine and it will comfortably outlast the oil. What is more, Scotland's population is ageing faster than the rest of the UK, and proportionally there are fewer young immigrants wanting to work there than in England, for instance.

The Institute of Chartered Accountants of Scotland (ICAS) has said that an independent state would be weighed down with its pensions liability for the public sector, much of which is unfunded. As for the UK-wide pensions protection fund – which acts as a backstop for failing schemes – the ICAS argues this would have to be split and again could be a huge burden on Scotland.

What's more, the large number of pension funds now in Scotland would face tougher EU solvency requirements as post-independence they would be considered "cross-border". There is the distinct possibility these schemes could move south where the hand of the EU will be gentler.

And none of this takes into account the fact that an independent Scotland may not automatically be an EU member; nor what happens to national insurance contributions and the state pension. In short, untangling the pensions position of Scotland could be the biggest headache of the lot, should the Scots vote to leave the union.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
News
people
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
News
i100
Life and Style
fashion
News
videoJapanese prepare for the afterlife by testing out coffins
Arts and Entertainment
Harrison Ford attends Blade Runner at Target Presents AFI's Night at the Movies at ArcLight Cinemas on 24 April, 2013 in Hollywood, California
film... but Ridley Scott won't direct
Sport
Hughes is hit by a bouncer from Sean Abbott
cricketStephen Brenkley on batsman's tragic flaw that led to critical injury
Sport
Dejected England players applaud the fans following their team's 3-0 defeat
football

News
people

Actress isn't a fan of Ed Miliband

News
The Bounceway, designed by Architecture for Humanity
newsLondon to add 'The Bounceway' to commuting options
Life and Style
Stefan Gates with some mince flies
food + drink
Arts and Entertainment
Rooney Mara plays a white Tiger Lily in forthcoming film Pan
filmFirst look at Rooney Mara in Pan
Life and Style
Customers browse through Vinyl Junkies record shop in Berwick Street, Soho, London
tech
Life and Style
health

Do you qualify – and how do you get it?

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

    £35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

    Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

    £Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

    Citifocus Ltd: Operational Risk Analyst

    £Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

    h2 Recruit Ltd: Business Development - Telecommunications - £50,000 OTE

    £25000 per annum + £50,000 OTE: h2 Recruit Ltd: London, Reading , Southend, Al...

    Day In a Page

    Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

    Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

    Our partner charities help veterans on the brink – and get them back on their feet
    Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

    Putin’s far-right ambition

    Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
    Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

    Escape to Moominland

    What was the inspiration for Finland's most famous family?
    Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

    24-Hour party person

    Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
    Michelle Obama's school dinners: America’s children have a message for the First Lady

    A taste for rebellion

    US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches
    Colouring books for adults: How the French are going crazy for Crayolas

    Colouring books for adults

    How the French are going crazy for Crayolas
    Jack Thorne's play 'Hope': What would you do as a local politician faced with an impossible choice of cuts?

    What would you do as a local politician faced with an impossible choice of cuts?

    Playwright Jack Thorne's latest work 'Hope' poses the question to audiences
    Ed Harcourt on Romeo Beckham and life as a court composer at Burberry

    Call me Ed Mozart

    Paloma Faith, Lana del Ray... Romeo Beckham. Ed Harcourt has proved that he can write for them all. But it took a personal crisis to turn him from indie star to writer-for-hire
    10 best stocking fillers for foodies

    Festive treats: 10 best stocking fillers for foodies

    From boozy milk to wasabi, give the food-lover in your life some extra-special, unusual treats to wake up to on Christmas morning
    Phil Hughes head injury: He had one weakness – it has come back to haunt him

    Phil Hughes had one weakness – it has come back to haunt him

    Prolific opener had world at his feet until Harmison and Flintoff bounced him
    'I have an age of attraction that starts as low as four': How do you deal with a paedophile who has never committed a crime?

    'I am a paedophile'

    Is our approach to sex offenders helping to create more victims?
    How bad do you have to be to lose a Home Office contract?

    How bad do you have to be to lose a Home Office contract?

    Serco given Yarl’s Wood immigration contract despite ‘vast failings’
    Green Party on the march in Bristol: From a lost deposit to victory

    From a lost deposit to victory

    Green Party on the march in Bristol
    Putting the grot right into Santa's grotto

    Winter blunderlands

    Putting the grot into grotto
    'It just came to us, why not do it naked?' London's first nude free runner captured in breathtaking images across capital

    'It just came to us, why not do it naked?'

    London's first nude free runner captured in breathtaking images across capital