Welcome to 2016.
Over the last few weeks, PN has had to remind himself that it is (still) winter. He has found himself walking around his dwelling (not his office – note that) turning radiators down or off. Then, as the temperature started to fall from the relatively mild 10+ degrees Celsius at the end of last week, the central heating in PN's house decided to stop working. In a moment of rare foresight, PN had bought insurance against this sort of thing a few years previously and, patting himself smugly on the back, he dialled the appropriate number, expecting to encounter someone ready, willing and able to repair his ailing boiler. The number PN dialled got him through to a switchboard which offered him a number of options: if you would like to purchase insurance cover for your boiler, press 1; if you would like a poster to put in your window telling everyone how protecting your heating system is a good thing, press 2; if you would like to know how insurance for your central heating could help your favourite sports team win its next match, press 3. This went on until finally: if you would like to speak to someone about a claim because your central heating has broken down, press 9.
Some time before option 9 was reached, PN had considered ending it all in much the same way as the character George Bailey, played in the 1947 film “It’s a Wonderful Life” by James Stewart, considered doing. Unlike James Stewart’s character in the film however, there was no “angel” on hand to help PN. Rather, PN was forced to grit his teeth, close his eyes and then think about those things which, he once read, were supposed to keep him calm (e.g. spongy, white clouds, the music of J.S. Bach, Jelly Babies), PN eventually got through to someone who asked him to explain his problem. The someone then promised to pass PN's details to a second someone who would, PN was told, within two hours, make an appointment for PN with a third someone. This third someone (so; not PN) would call at PN's house and repair PN's broken central heating system. Three freezing hours later, PN was wondering whether the first someone had got stuck in one of the many floods which has lately gripped the North West of England. PN called the number again and, metaphorically, waded through the options’ swamp that he had previously negotiated. Speaking to a different someone, who appeared to have the dulcet tones of a young man from the same or possibly different part of Bangalore (possibly) as the first someone, PN explained how he was waiting for the first someone to tell him when his central heating could be mended. The new someone from Bangalore (who introduced himself somewhat improbably as "Warren"), tried to put PN through to yet another someone; possibly the original third someone. After 25 tense minutes, PN spoke to this "new" someone who promised to get another someone (although PN was willing to settle for anyone at this point) to visit PN the following day. Against considerable odds, the "final" someone called PN at a time when he was conscious and at home and appeared at his dwelling a time when he, PN, was still conscious and at home albeit frozen solid.
Options are rarely a good thing on a telephone. Unlike the options which appear on a computer screen (which one can look at and scroll down until one gets to the right one in a couple of seconds), telephone options take a long time to get through and the calm, evenly paced tone of the recorded voice has an effect on the listener which is similar to the effect a former teacher of PN had on him when that teacher ran his fingernails down the blackboard to get pupils' attention. Yes; PN is old enough to have been taught by teachers who used blackboards and (<ahem>) chalk. The same principle applies to options at retirement. Not very long ago, up until early last year in fact, one's options at retirement read as follows; buy an annuity. The annuity was provided through (usually) an insurance company which agreed to pay the individual a certain income for life. The problem with this arrangement was that it was inflexible and (invariably) non-transferable. This meant that, if one were unfortunate enough to die within a few years of retirement, the income (or rather the right to receive it) disappeared and, in effect, the insurance company received a windfall. The arrangement seemed to represent a particularly poor deal or a poor sharing of the risk for those who had built up a large amount of money in their personal pension plans. As previous editions of PN have made clear, things are different today. At retirement, one is still able to buy an annuity although relatively few people do. One is able to take advantage of a "flexi-access drawdown", drawdown, total commutation (meaning one can take the entirety of one's benefits as cash - less tax) and free access to fraudsters who will "allow" you to invest in special split conversion, double-downdraft fiscal disappearance schemes. One of these options is unlawful and not remotely tax efficient; guess which one. Choosing the right or at least the most appropriate option is considerably more difficult than selecting the right option in the option swamp PN referred to earlier so it is not difficult to estimate how many will choose option number four (let's say) when they really should have kept on listening and gone for option eight. The answer to the vexed question about selecting the best option is or should be to obtain advice from someone who knows or who ought to know what to do. Cue the independent financial adviser (IFA). PN is not an IFA. IFAs have been left with a difficult job to do. Since the abolition of commission-based fees, IFAs tend to charge for their advice in the same way as, for instance, solicitors do. This means that the recipient of the advice gets a bill as opposed to seeing a regular, small deduction from his/ her benefits made on his or her behalf by the pension provider. Whilst this new rule provides what PN will, with only a small wince, call transparency, it also provides individuals with a shock (often accompanied by a physical jolt) when they see the cost of the advice; usually four figures and often five. This cost may not prove such a surprise to those with pension accounts valued in the high six or early seven figures (and after all, good advice is worth paying for - isn't it?) but, as the advice is given on fundamentally the same principles in most cases, an invoice for £5000+ may come as a nasty surprise to an individual whose pension account has (say) £100,000 or less in it. PN does not give financial advice.
PN is sceptical of the values of options. Options on telephones are easy to discount. They serve to make life more difficult than it was before they were invented – when there were people to talk to on the other end of the telephone. They should, therefore, be abolished. Options on retirement are less easy to dismiss but they are not necessarily a good thing. Remember this about options; had PN pressed option 2 last week, he would have had to keep warm writing this piece by wrapping himself in a poster.
If you think that this article has helped ease you in to your morning, press 1. If you think that this article does not contain enough jokes about Manchester United's mysterious inability to score goals at Old Trafford, press 2. If you think that this article has inspired you to want to live and then retire in a simple, financially uncluttered society, buy a flashlight, learn Morse code and send a signal to Mr George Osborne.
Until next time......