# Buying a pension. Options.



## Pensioner66 (17 Jan 2012)

Hi all,
I'm looking for a bit of help as this area is a mine field for me. I retired in 2008 with a small private pension fund held by an Irish institution. I was 62 and the pension fund offered me a deferment option so that I could buy a pension on my official retirement date. The advantage I felt was that the pension would be bought for fewer years hence higher and so a little bit of sarcifice for 3 or 4 years would be worth it.
I received by new pension statement in the post late last week and was upset to find that
(i) the fund had lost 2.64% on the 2008 value.
(ii) the annual pension that the fund could buy me (taking like for like - standard pension with no yearly increase) was reduced by 26%. This has left me very upset as I received no annual statements or correspondance from the pension company telling me this would be the case.
From what I read 18.92% was held in an Exempt Active Fund and the balance of 81.08% was in a capital protection fund so to see this much of my small pension eroded over such a short period is a great shock. As far as I could see I had risk proofed my pension.

My first question is, can anyone know where the 2.64% went? There are no details from the company regarding fees etc.
Secondly, do I have any other options to maximise my annual pension. Do I have to buy a pension off of this company who I felt have treated me very shodily? Can I shop around and ask the company to release the funds to a different company to buy my pension. Is there anyway to cash in a pension as the annual amount the pension firm are proposing is 1/29th of the fund if you take the inflation adjusted option so I need to live to 95 to get my money off them. It seems like very poor treatment after years of paying into this fund. 
I would really like any advice on this. I would have thought the company would have at least had to send me an annual statement so I could have seen this coming. 
Thanks for your time and I understand that if I wanted to take the matter further I should seek professional advice but I would just like an explanation of how I got here and what my options are.
Rgds,
Pensioner.


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## ClubMan (17 Jan 2012)

Pensioner66 said:


> (i) the fund had lost 2.64% on the 2008 value.
> 
> ...
> 
> ...


Your pension savings seem to have remained invested in funds that were conservative but probably not immune to losses. I suspect that you just got hit by some losses and that some fees were also charged. I would imagine that some charges would still be levied so you should ask your pension provider for clarification on what these are and what the loss is attributable to.


> (ii) the annual pension that the fund could buy me (taking like for like - standard pension with no yearly increase) was reduced by 26%. This has left me very upset as I received no annual statements or correspondance from the pension company telling me this would be the case.


When you say "annual pension" do you mean an annuity that gives you an income for your retirement years?


> Secondly, do I have any other options to maximise my annual pension. Do I have to buy a pension off of this company who I felt have treated me very shodily?


Again if you mean an annuity then I presume that you can shop around for this when the time comes. But don't assume that your existing provider has necessarily treated you shoddily. Pensions are complex and while all of the details, issues, caveats, charges etc. are normally set out in the documentation this information may not always be easily understood and many people don't manage to read and understand it all. So you may have been given the information after all.


> I would really like any advice on this. I would have thought the company would have at least had to send me an annual statement so I could have seen this coming.


If your pension was paid up then my understanding is that there is no obligation on the pension provider to send out annual statements and in my experience most don't. 


> Thanks for your time and I understand that if I wanted to take the matter further I should seek professional advice but I would just like an explanation of how I got here and what my options are.


I am not a pension/finance professional. You will probably get some further comments/advice here. But ultimately you might want to get independent professional advice on your specific situation.

Hope this helps and good luck!


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## Jim2007 (17 Jan 2012)

Seriously only 2.6%!  Taking fees into account I'd say the company did very well.  There are many on here who have lost well into the double digits.  I would not be so quick to dump them, what are they suggesting?


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## Pensioner66 (17 Jan 2012)

2.6% on the fund but a 25% drop on the income the annuity provides.


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## Conan (17 Jan 2012)

Annuity rates across the market have reduced over the last few years, mainly based on increased longevity (people living longer) and lower interest rates (not to be confused with Deposit Rates). On average, a male retiring today at age 65 has a life expectancy of circa 20 years.
I presume you will have an open market option in relation to the pension fund (i.e. you can buy the annuity with any provider in the market). So you should get quotes from all annuity providers (though it is a limited market currently). 
Do you have the option of going into an Approved Retirement Fund instead of an annuity?
Also you need to take into account your state of health. If you expect to live into your 90's the annuity will be best but if you are in poor health the ARF may be better.

I suggest you seek some professional advice (and do some homework yourself).

Conan


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## Jim2007 (17 Jan 2012)

Pensioner66 said:


> 2.6% on the fund but a 25% drop on the income the annuity provides.



Yes but in the times we have been going through the objective was to preserve capital, you managers did, most did not.  As I said many lost more and income to boot.

Here in Switzerland I see a lot of retired people over coming the lack of income by simply moving to a cheaper country for part of the year, most often the winter as many sufferers from arthritis find it hard going.  Many go to Spain, Portugal or the south of Italy for the winter and return in the spring.

Point in fact, I say a very dear friend of mine off to Argentina last october, he is staying there until early april and return to Switzerland then.  He is 87!


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## Baracuda (20 Jan 2012)

Leaving aside the fund performance for a moment, I cannot understand how your annuity rate has dropped so much, are you looking at like for like quotes eg level v indexed? Perhaps annuity rates were exceptionally high when you got your original quote, I don't think that there has been a massive drop like you have quoted 

Would you mind posting what the annuity rate you were quoted back in 08 and again this year and include if they were level of indexed? Normally it is between 11 and 15 years to break even between level and 3% indexed annuity


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## ashambles (26 Jan 2012)

I’ve always found it difficult to find historical annuity rates on line, or even current rates. My suspicion is pension companies don’t feel it’s in their interest to make it easy to see how low these figures are. 

According to an indo article in 2011 rates dropped from 6 to 5.4 within a matter of months, so between 2008 and now it could be from 7% to 5%, i.e. a 28% drop. http://www.independent.ie/business/...e-forces-savers-to-rethink-plans-2877261.html

  The OP's funds sound like Irish life ones, you can chart these relatively easily on [broken link removed].

  It shows that since 1/1/2008 the Active Mgd Fund is down 15%, the cap protection fund is up 1.89%.  Since they charge clients different fees per fund that these are likely to be pre-charge returns, i.e. better than you’ll really see in your own pension. 

  But anyway if you’re 15% down on 18.9% and 1.89% up on 81.1%, then that would blend to a combined loss of 1.31% (I think).

  Remember as well that the government took 0.6% of your fund, so just on those numbers you’d expect the fund to be down 2% or so. With charges I’d guess the figures would be more like 6% down. The reason you’re “only” down 2.8% is either you had low charges or you continued to contribute which offset some of the charges, taxes and losses.


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