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The Risks in Buying Annuities

Pensioners take ‘the biggest gamble’ of their lives when they buy an annuity to provide for their retirement. According to the former Downing Street pensions adviser Ros Altmann, “Pensioners are not properly warned about the risks involved in buying annuities and they would have to live until the age of 90 before their annuity became ‘good value’...”

This means that millions of pensioners forced to turn their nest eggs into a retirement income, or sell other assets, were undertaking a ‘high risk’ enterprise that could cost them most of their hard-earned cash. Annuity rates are at an all-time low and have been collapsing for some time due to the Bank of England’s money-printing efforts. 

Dr Altmann, the former pensions adviser to Tony Blair, warned that pensioners who buy annuities at 65 will not get their money back unless they live until the age of 82, and would have to reach 90 before their annuities became ‘good value’.

She further added: ‘Buying an annuity could be the biggest gamble you ever take in your life. An annuity purchase is a long-term investment decision, which risks losing much or all your money, yet people are given no risk warnings about the dangers of buying.’

That reality is that most people will receive a very poor return on their money and many will not get their money returned to them at all. Most people will receive a very poor return on their money and it is not the 'safe' option that people think it is....WHY???

If you die soon after buying your annuity you lose most of your pension savings. 

As inflation rises, your level annuity becomes worth less and less each year.

Once you have given your money to the insurance company and bought the  annuity, if your circumstances do change, your money is gone and you will not have a second chance.

If pensioners who have bought an annuity die soon after retirement, their pension fund passes to the insurance company.

At Asia Pacific Pensions we encourage you to think about the bigger picture and point out the dangers of locking into an annuity rate at the lowest levels ever without having any chance to benefit from any increase in future interest rates or equity process.