'Guaranteed' pensions will cost investors plenty

Tom Selby
Friday 06 July 2012 14:30 EDT
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People could be pushed into high-charge savings schemes as the Government announced plans to encourage insurers to develop guaranteed "money safe" pensions, an expert warned this week.

Robert Reid, the managing director at Syndaxi Chartered Financial Planners, said: "The problem with guaranteed products is they tend to be quite expensive.

"People shouldn't just jump in and buy a guaranteed product because the Government says they should – it's important to understand what the guarantee is, what the risks are and how much it costs."

His comments followed a call by the Pensions Minister, Steve Webb, for pension companies to develop products which guarantee members get back at least the value of their contributions. He said that consumers have a "huge appetite" for certainty about their pension saving.

Mr Webb said: "Now is the time for the pensions industry to look at the market gap in relation to affordable guarantees and provide the products consumers are seeking.

"One solution could be providing an affordable 'money safe' guarantee. Another option could be offering an investment strategy that reduces the probability of capital loss."

A number of high-profile insurance companies, including Aegon and MetLife, have already developed schemes designed to protect investors from losing money. However, they come with high charges.

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