The man who carries a cat by the tail learns something he can learn no other way. This Mark Twain quote came to me when mulling over the vicious spat that broke out over the launch of the Pick-A Annuity Directory.
Annuities have become one of the most toxic personal finance products, resembling the sort of plague sent to earth by aliens that threatens to immediately wipe out the entire population.
Cue ticking clock, impotent politicians, ineffectual conventional weapons, a crazy boffin and maverick superhero.
Well, pensions may be a disaster movie in the making, but it won’t be coming to your cinema any time soon. While impotent politicians queue up in bus loads for auditions, there is no one to cast in the role of problem-solving genius, or caped crusader for that matter.
What we do have is Pica, which I understand to be an eating disorder where people find themselves compelled to digest the most disgusting substances such as chalk, dirt or sand.
In the world of pensions, Pica represents the Pensions Income Choice Association, a group of sensitive souls, appalled at the raw deal tens of thousands of retirees receive from their insurers each year, and who are determined to do something about it.
Hence the launch of Pick-A Annuity, a simple online tool, aimed at ensuring no one accepts the first derisory offer from his or her company.
How it set the other top cats of the annuity world hissing and spitting, leaving Pica’s noble members sitting in the mud eating unpalatable amounts of dirt.
I could have told them, sticking your neck out with honest intentions is a pretty thankless task, particularly when it comes to combustibles like annuities.
I road-tested Pick-A Annuity after returning fresh from a holiday, and I have to say I was quietly impressed.
No, it isn’t perfect. I was puzzled and concerned at the lack of explanation relating to fee levels, and why some advisers appeared to be charging zero and others, for the example I used, £6,000.
This is a short-coming, apparently, that Pica is aware of, and is sorting out.
I’m afraid I was at a loss to agree that execution brokers were given pre-eminence over independent advisers. It seemed to me that perfectly clear options, lucidly explained, were provided at each stage.
That is not to deny that some of the most aggressive, not to say oppressive, sales machines are currently operated by some of the direct annuity sellers.
Go on to their websites and check quotes at your peril. I am forced to do so from time to time, when deadlines are tight, and my phone rings constantly for weeks thereafter.
Without doubt they need reining in, but this is an entirely different issue from the dire need to provide straightforward information to relatively unsophisticated employees.
There are those who do not believe in annuitising in almost any circumstance, particularly not now.
Wait until annuities bounce, they say. My problem is, that in nearly 30 years of writing about pensions, I no longer believe in fairies at the bottom of the garden. Annuity rates have only moved in one direction. And virtually all that time, IFAs have advised against annuitising on the grounds that rates were too low. They were wrong every time.
Furthermore, at any point where I have compared the ten-year performance of an annuity with drawdown, the annuity has always won out.
The future, as we always say, may be different, and today is indeed another country. But the only product that will provide individuals with small pots with any kind of security in old age is an annuity.
And don’t forget it is in ifas’ interest to recommend drawdown, as they get to go on managing your money for potentially decades to come.
All sectors have vested interests which is why annuities are a cat o’ nine tails scarring anyone who tangles with them.
So this new service attempting to help retirees lock into an annuity offering a fair deal, must be applauded, even if they haven’t yet got it entirely right.
Of course, I too, am biased. I get to talk to those luckless souls who, on receiving notifications from their pension companies, go straight online. There they find firms offering to swap their entire pension for ready cash.
They lose everything. Now that does makes me weep. Much better they pick-up a pension with Pick-A.