Millions Will See Their Pensions Slashed By 20% As New Rules Are Set To Send Annuities Plummeting - Video

(Bloomberg) — The Obama administration is weighing how the U.S. Treasury and Labor Departments  can encourage workers to turn their savings, 401k’s and IRA’s into   Annuities.  The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities

Millions of people could see the value of their pensions slashed by up to 20 per cent because of new EU rules.

Those with a £100,000 pension fund could be more than £1,100 per year worse off in retirement because of the reforms, research has shown.

The Solvency II rules, which are due to come into effect in January 2014, will force pension funds to hold a higher proportion of ‘safe’ Government bonds.

The reforms are designed to make pension funds safer and reduce the risk of them going bust.

Annuities, which set retirement income for life, have already fallen to historic lows because of the impact of quantitative easing.

At present, a pension annuity fund may invest 20 per cent in low-yield gilts and the rest in riskier corporate bonds which have a higher rate of return.

But under the new EU rules, annuity funds will be forced to hold a higher percentage of gilts.

New research by Deloitte suggests annuity rates will plunge by between five and 20 per cent when the directive comes into force in January 2014.

A £100,000 pension pot currently gives an income of £5,837, but once the regulations come into effect they will be between £292 and £1,167 a year worse off.

The return on government bonds has fallen in value because the Bank of England’s quantitative easing programme has involved buying them up to inject an extra £325bn into the economy and investors are moving their funds from risky countries like Greece to Britain. This extra demand drives up their prices but consequently means that interest rate yields plunge.

Yields have fallen to historic lows, and the situation could get worse.

Dr Ros Altmann, director-general of Saga, said: ‘As a result of quantitative easing which has forced gilt rates down so pensioners are getting less in retirement for the money they have spent their whole lives saving.

‘The EU rules will make the value of pensions fall further. Its a series of pieces of bad news for British pensioners.

‘As a result of these rules everyone will get much less pension out of their fund. We don’t know exactly how much less.

‘We are anxious that the UK Government should stand up for UK pensioners.’

She added that plunging annuity rates are putting young people off saving for retirement.

In a double-whammy for male pensioners, new rules banning gender discrimination could hit retirement incomes.

At present, men get higher annuities because of their shorter life expectancies.

Richard Baddon, insurance partner at Deloitte, said: ‘Annuity rates will also be affected by the EU gender ruling, due to be implemented at the end of the year.

‘Men and women will be offered the same rates and although it isn’t yet clear how this will impact insurer pricing, it could mean that annuity rates fall for men and rise for women.’

Fixed annuities offer some sort of guaranteed rate of return over the life of the contract. The insurance company also guarantees that the periodic payments will be a guaranteed amount per dollar in your account.

Variable annuities allow money to be invested in a tax-deferred manner. Their primary use is to allow an investor to engage in tax-deferred investing for retirement in amounts greater than permitted by individual retirement or 401(k) plans. In addition, many variable annuity contracts offer a guaranteed minimum rate of return, even if the underlying separate account investments perform poorly.

But when you die your heirs receive nothing. In a 401k or IRA, you can leave your heirs your wealth. Once again the Government is here to help! (Themselves)  Do Not Fall For This Goverment Scam! This issue has not gone away, they are furthering their plan to scare the American people into Submission. It hasn’t worked in Europe and it will not work in America either.