The latest scandal coming your way from Britain involves mis-selling and unfair trading of annuities, according to Neue Zuericher Zeitung. (For some reason the Swiss like to highlight bad banking behavior in other financial centers). It happens there too.
Hundred of thousands of UK retirees, often with low saving, have been lured into high-risk insurance products with low payouts. This from a warning by the Financial Services Consumer Panel (FSCP), an independent advisor to the UK Financial Conduct Authority, which follows an investigation into the annuity market calling for stricter rules and against excessive fees.
Pensioners often buy annuities using their retirement accounts under rules dating to 1975 which allow those over 65 to make the switch, About half eligible retirees now do so. Last year 400 000 annuities were sold, the most significant form of UK private investment.
According to the FSCP, retirees making this one-time, irreversible switch are often badly informed and advised. “They land amidst sharks”, the Swiss paper says winding up with meager pensions costing high fees. Pension Minister Steve Webb has already spoken out against ‘excessive’ earnings in this business.
Trying to switch annuities in this unsupervised market confronts the pensioner with a total lack of transparency regarding pay-out levels and very high fees to intermediaries, a commission of as much as 6%. They are confronted with unappealing alternatives aimed at maximizing the fees they can collect. Complaints are rising and regulations are coming to improve the annuities market. At the start 2013, UK insurance advisors had to meet minimum standards and guarantees. The result was that they used aggressive unregulated middlemen to avoid the rules.
It reminds me that US investors are often mis-sold variable annuities too. In a period of low interest rates and longer life expectancy on both sides of the pond (as well as in the Alps) insurance companies have an incentive to chase after annuities business. The scandal is not confined to the City of London.
More news today from China, Japan, Brazil, Britain, Canada, Israel, Finland, The Netherlands, Thailand, Ireland, Singapore, Panama, and a stock sale follow:
*First up is news note from Japan via Singapore. Just because investors are going into Japanese real estate doesn’t mean they believe in Abenomics stimulating growth. It’s just that Japan lacks modern buildings. Vacancy rates at Tokyo logistics properties were at 2.7% in Q2, the lowest since at least 2004, according to real estate services firm CBRE.
“With 97.5% of the market still being older, obsolete buildings†there will continue to be opportunities to invest, said Jeffrey Schwartz, co-founder and chairman of Singapore-listed Global Logistic Properties Ltd, GBTZF. He added: “With the growth of e-commerce, same-day delivery, and the need to get closer to your customers, all trends point to the need for more efficient, better logistics.â€
