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Taha Lokhandwala considers whether the UK government’s latest move to create free choice in DC markets stacks up for pension schemesMuch of the talk in the UK over the last year has been one of annuities, whether it be bulk, individual, medically underwritten or just downright poor value. The reason has been the government’s reforms made in last year’s Budget statement.The chancellor has allowed those approaching retirement in defined contribution (DC) schemes the freedom to spend any which way they please. In yesterday’s Budget, he extended this freedom to existing annuitants as the UK government began consulting on creating a secondary market for annuities, where consumers wanting to rid themselves of the retirement product could sell their income stream for a cash sum to a third party.This creates an interesting prospect, one where bundled together annuities essentially create a new form of fixed income investment, as annuity providers continue to pay out regular income streams to the third party, until the contract ends as the original policyholder dies. On a basic level, this kind of makes sense for pension funds. Nothing is really more liability-matching than an annuity, and even when not an exact match like a buy-in, there is still some correlation. The government alludes to this. In the consultation, HM Treasury says asset managers, pension funds, insurers and intermediaries are ideal buyers for second-hand annuities, with the mortality risk the buyer takes on offset by longevity risk. And we all know pension funds have enough of that.So that should be set, then. Pensioners will rush to the markets to sell their ‘poor-value’ annuities, intermediaries will bundle them into fixed income products, and asset managers and pension funds will start adding the products into their fixed income allocations.Well, not quite.As mentioned above, bundled annuities do not quite match a pension scheme’s liabilities as well as a buy-in. So, according to Ian Mills of consultancy LCP, the only real place for the product would be if, one, it was valued cheaper than a traditional bulk annuity, and two, if it provided a better yield and risk management than traditional fixed income.It is not unreasonable to suggest that bundled annuities, packaged in the right way, could do this, but the core issue remains pricing. The government, in its own consultation, suggests it has no concept on how to price second-hand annuities appropriately. In fact, it goes on to say retail investors should not be allowed to purchase second-hand annuities due to the complexities in determining a fair price.(Immediately, one sees a contradiction here, given that the sellers in the market are given free rein while the very same market, comprising the same retail investors, are not trusted to buy. But that is another issue.)This idea of a fair price is a difficult one to understand, as annuities are priced in for all risks from the start to provide this guaranteed income. To leave this, the holder obviously must prefer flexibility, but this always comes at a huge cost. So the only real way for this market to come together is for annuity holders to take a significant shaving off the value of their income stream.Bob Scott, also of LCP, puts it quite succinctly: “If someone wants to buy your annuity, you probably shouldn’t sell it. And, if someone wants to sell their annuity, the buyer is unlikely to offer them an attractive price.”That alone makes this is a difficult policy to envisage taking off. Even if there were a fully working market for secondary annuities, which created new fixed income products for pension funds and reduced the cost of annuities across the board, it could be a counter-productive area for schemes to enter.Because whatever the benefit for pension funds, ultimately, the cost of it all will be laid fully at the feet of pensioners.
FacebookTwitterWhatsAppEmail分享 A number of clubs are organising their own testing procedures. Yet the physical rigours of the elite football environment also have an effect on players’ immune systems which have always made players susceptible to viruses. players water rack may henceforth have individual players name on them ‘Professional players have been shown to be regularly immunosuppressed,’ former Chelsea doctor Dr Eva Carneiro tells Sportsmail. ‘This has been demonstrated by both blood tests and the rate and incidence of upper respiratory tract and other infections, which is how a virus like this starts. That’s due to the amount of sport they play. The physical activity, playing at a professional level, with games sometimes every 72 hours, as well as training creates a strain on the body.’ The risk is compounded by overseas travel. ‘It means they have to enter an airport even though they might be travelling by private jet,’ adds Dr Carneiro who was at Chelsea for six years. Read AlsoCoronavirus: Ronaldo sends message to fans as he remains in quarantine “’Travel can also mean a change in sleep patterns, arriving back in the early hours of the morning, creating a fatigue which again can make players susceptible.’ Promoted Content5 Of The World’s Most Unique Theme ParksWho’s The Best Car Manufacturer Of All Time?The Biggest Cities In The World So FarWho Is The Most Powerful Woman On Earth?7 Universities In The World With The Highest Market Value7 Of The Wealthiest Universities In The WorldWho Earns More Than Ronaldo?5 Of The World’s Most Unique Theme ParksCan Playing Too Many Video Games Hurt Your Body?Contemplate Life At These 10 Stargazing LocationsBirds Enjoy Living In A Gallery Space Created For ThemThe Best Cars Of All Time Loading… There are strong indications that professional football clubs will adopt operation mind your water bottle when the leagues return after the virus forced embargo. It’s the pitch side bottle-throwing habit which drives some Premier League club doctors mad. A player will catch one, drink from it and throw it back over the white line from where it will be placed back in the rack for anyone else to use — a ready-made means to transmit the viruses to which elite players can be particularly prone. One doctor speaks of pushing to get name labels put on bottles to prevent a virus spreading in such an elementary way but it was a struggle. Players in prime physical fitness, playing elite football week-in week-out, think they’re untouchable. The Covid-19 virus has revealed they are as prone to infection as anyone else. Within a 12-hour period late on Thursday, no fewer than five Premier League players were self-isolating, with Arsenal manager Mikel Arteta and Chelsea’s Callum Hudson-Odoi both confirmed as infected.Advertisement