FT Personal Finance reports on Prudential’s final withdrawal from the annuity market, following a year of progressive retreat in the face of a fast-shrinking marketplace since the April 2015 pension freedoms came in. The FT says that this curtain being drawn marks a sad departure for what was once among the dominant forces in the UK annuity market.
The withdrawal actually began last March, when Prudential ended its involvement with bulk annuities, whereby providers buy up liabilities from corporate schemes – blaming the Solvency II capital regulations which, it says, have made it more expensive for insurers to underwrite annuities.
The latest development, however, is that Prudential is now stopping the sale of its own annuity products on the open market – thus joining Reliance Mutual, Friends Life, Partnership Assurance, Aegon and Standard Life, who have already quit. Clients on its own savings platform will be offered products from other providers instead. The FT reports that Prudential will, however, continue to hold a back book of some £45 billion in annuity commitments from past sales.
Money Mail focuses its attention on the pathetic interest rates currently available to current account or easy access savings account holders. Recent rate cuts from NS&I, TSB and Nationwide have left cash-holders struggling to beat 1% on their balances, it says. And that comes on top of downward adjustments to the payouts on premium accounts from Lloyds TSB. Nationwide’s Easy Saver account, which allows unlimited numbers of withdrawals, is paying just 0.25%, it says.
The good news is that some providers are moving in the other direction. Charter Savings Bank and Leeds Building Society are (marginally) improving the returns on fixed rate deals, says the Mail. And Tesco Bank has pledged to hold its rate to current account holders at 3% for at least two years. That’s for a maximum £3,000 balance, which effectively means that the maximum payout would be £88. These days you have to draw your comfort wherever you can find it.
The FT expands on an earlier report about how the gender pay gap is shrinking – because, it says, young men are now shifting into low-paid and part-time work that would once have been the main province of women. A report from the Resolution Foundation’s Intergenerational Commission suggests that the average twentysomething male will have earned £12,500 less by the time he reaches his 30th birthday than men of the previous generation.
Young men’s average wages have fallen, the report says, as the proportion on low paid work has grown by 45% since 1993 – with the number of twentysomething males in retail jobs doubling and the number working in bars and restaurants actually trebling. At the same time, however, women’s incomes have seen modest growth because they have moved into new employment sectors. The number of twentysomething women in business and finance has almost doubled since 1993, it says, and the number in teaching has increased grown by 120%.
Yet both millennial sexes are faring less well off than their elders, according to Torsten Bell, the executive director of the Resolution Foundation. The FT quotes him as saying that “the long-held belief that each generation should do better than the last is under threat. Millennials today are the first to earn less
Yet again it’s SJP in the glare of the headlights at the Sunday Times Money this week. It leads with a negatively angled story highlighting the rewards that SJP advisers can benefit from, which it says are linked to funds under management sales targets. They focus on some lavish aspects of its rewards scheme, highlighting Asprey cufflinks as an example. David Bellamy, SJP’s chief executive is quoted in the article and tries to make the point that servicing clients well is the firm’s primary focus. Whether he’s done enough to quell readers’ concerns, only time will tell.
Another warning shot – we’d expect to see more stories about the subject of fees for professional advice more generally in the Sunday Times in future. This week’s lead Money story ends with a call to readers “Do you know how your financial adviser is paid?” and a request for readers to email in their stories. While undoubtedly the vast majority of clients receive outstanding advice and support from financial advisers, all too often it is the negative stories which grab the headlines. With a profession doing its very best to encourage more people to discover the benefits and importance of sound financial planning, it’s a shame that the many positive outcomes are so often ignored.
In a departure from his usual investment commentary, this week’s personal account column from Ian Cowie looks at the protection of pension savers’ funds, following the BHS pension debacle. He reminds of the importance of the role of effective member trustees as the owls in the tree, to look out for and challenge attempts to undermine pensioner benefits within pension schemes.
The final part of their four week series looking at building a first investment portfolio this week sees the recommendations of Matt Hoggarth, chartered financial analyst with Thesis Asset Management. He highlights the benefits of investment trusts suggesting around two thirds of the £10k be invested in the Law Debenture Corporation and the remainder split between the International Public Partnerships, BH Global and TwentyFour Income investment trusts.
The Sunday Telegraph’s money section analyses “the best place to buy your favourite shares and trusts”. Having previously published tables which included the use of open ended funds, this time the calculations are different so the Telegraph has published a table that sets out the cheapest fund shops for those circumstances where investors are just using shares or investment trusts. They do however warn about the costs of switching to a different stockbroker, platform or supermarket which can be a deterrent.
The Financial Mail on Sunday looks at equity release. Encouraging elderly homeowners to downsize to a smaller property is a Government objective, as outlined in last week’s White Paper on housing. But, claims the MoS, many are reluctant to do so. Indeed, a record number are staying put and instead releasing equity from their homes to give their finances a boost in retirement. James Dove looks at some of the issues involved.
“I’m waiting for the next crisis to deliver my absolute returns” is the title of this week’s fund focus column. In it, Jeff Prestridge looks as the popularity of absolute return funds and highlights Defensive Capital, an absolute return fund managed by Brooks Macdonald, which he says has served investors well. Its aim is to deliver absolute returns over every rolling three-year period. Over the past three years, it has generated a return of 33 per cent. Manager Jon Gumpel says his mantra is ‘not to over-promise while seeking all the time not to under-perform’. The fund is spread across key asset classes including bonds, convertible bonds, preference shares and undervalued investment trusts.
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