Questions Of Cash: We can't survive on our pension thanks to QE and a change in the law
Q. My pension income is to be cut by 40 per cent, due to the alteration to the Government Actuary Department's calculation. My wife and I cannot survive on such a drastic reduction. The rules are ridiculous – we are barred from taking out income that our investments generate.
Pensioners using income drawdown will be distraught when they realise what is happening. The figure used by GAD is significantly below yields available from investments and shows that the wrong benchmark rate is used. A rate of 4.5 per cent is more realistic. Some retail bonds from insurers with terms around 2032 have redemption yields over 10 per cent and running yields in the 4 to 6 per cent range. DR, by email.
A. Where a pensioner is paid in retirement on an income drawdown basis, the rate is determined by the Government Actuary Department's annuity rates. These are based on 15-year gilt yields, which are at present very low – 2.25 per cent – in part because of the Bank of England's current programme of quantitative easing. Saga reports that annuity rates have fallen by a quarter in the past four years. The income drawdown ceiling was also reduced by last year's Finance Act. A spokeswoman for LV, which was formerly known as the Liverpool Victoria Friendly Society, adds: "[The reader] is in the unfortunate situation where a reduction in 15-year gilt yields and recent lower investment growth have been compounded by a change in pensions legislation, limiting the maximum income available under drawdown to 100 per cent of the GAD maximum, rather than the previous level of 120 per cent of the GAD maximum.
The industry has been lobbying the Government to reconsider this position and it does highlight one of the risks of income drawdown plans if people are relying on a high level of income. The Government's concern is that the current levels of income may be unsustainable for the longer term, hence the new lower income limit. For those who can show evidence that they are in receipt of a minimum income requirement of at least £20,000 per year, a flexible drawdown product could be utilised to receive a higher level of income from their drawdown plan. This flexible drawdown facility was introduced by changing legislation last year, but has yet to be embraced widely across the pensions industry. The issues raised here highlight the importance of getting good-quality financial advice in retirement to ensure that income requirements can be met in the short and long term."
Q. I bought a Panasonic HDC-SD90 high-definition camcorder from Pixmania.co.uk on 26 November. The website showed that from 1 October 2011 to 14 January 2012 this model was eligible for £50 cashback from Panasonic. I submitted my claim to Panasonic on 2 December. On 24 December, Panasonic replied that because the model I purchased was not from UK stock, the cashback offer was not available to me. Panasonic said to pursue the matter with Pixmania. But when I contacted Pixmania, I was told to contact Panasonic. I wrote again to Pixmania explaining that Panasonic had rejected my claim. Pixmania said it would contact Panasonic, but I have not heard anything more. NF, Ipswich.
A. Pixmania operates its website from France, but is now part of the Dixons Group. A spokeswoman for Dixons says: "The information [the reader] provided is correct, the cashback offer was advertised on our website and should have been applicable. Sadly the refund was refused by Panasonic as the item was purchased outside the UK, in this case via Panasonic France. Our purchasing team are currently in contact with Panasonic to find a solution for such cases and avoid any further confusion. As we had advertised the cashback offer on the HDC-SD90 high-definition camcorder and [the reader] provided all the requested documents, a bank transfer for £50 was issued on the31 January directly by Pixmania. This was authorised to avoid any further delay during the discussions between our purchasers and Panasonic."
Q. We bought tickets for a British Airways flight to Lisbon, flying on 27 December, at 7.25 in the morning. I printed the boarding passes the day before and went to the airport early in the morning. We arrived at the check-in desk at 6.53, but the lady attending the desk did nothing to process the boarding. I felt she was intentionally slow to make us reschedule the flight. I complained to BA, but it referred me to a link on the BA website, which states that the check-in desk closes 45 minutes before departure. This conflicts with the information on the boarding pass, which showed that the gate closed at 7.05. I would have accepted BA's argument if we were not informed by the pilot of the flight we took later that day that it had been delayed by another flight arriving late and by a late passenger. I believe BA staff used their discretion to stop us boarding the plane. ZN, London.
A. You have confused the time you need to be at the departure gate for boarding the plane with the time by which you must have checked in – presumably to check-in luggage for the hold, as you had already printed out your boarding passes. British Airways specifies that the check-in process must be completed 45 minutes before departure, that passengers must have cleared security 35 minutes before departure and be ready to board 20 minutes before departure. This normally means being at the airport at least an hour before departure.
BA's requirements are similar to those of other airlines, though some require passengers to be at departure gates even earlier. A spokesman for BA says that all the timing requirements are made clear on its website. "As [the reader] writes, he reported to the check-in desk 32 minutes before departure, and so unfortunately he was too late to check in." Frequent flyers will be aware of these requirements – you have paid the price for not reading the flight terms and conditions with sufficient care.
Questions of Cash cannot give individual advice. But if you have a financial dilemma, we'll do our best to help. Please email us at: firstname.lastname@example.org
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