2015考研英语题源阅读：Retirement income

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　　2015考研英语题源阅读：Retirement income

　　You can't always get what you want

　　THE British government announced this year that it was offering "freedom" for retirees. No longer did they have to use their pension pot to buy an annuity, a guaranteed income for life. Instead they could take the money as cash and spend it (subject to a tax charge on all but the first 25%) or squirrel it away and pass it to their heirs. As I argued at the time, this was a very dubious reform; pensions are given very generous tax breaks (the cost of which is £35 billion a year) to encourage workers to save so they do not become dependent on the state, not so they can pass money to their heirs.

　　The unpopularity of annuities may also be due to a degree of financial illiteracy, as a survey by NEST, the pension scheme behind auto-enrolment, shows. Asked for their main priorties for retirement savings, those polled favoured

　　1) Income that grows in line with inflation

　　2) Security of a guaranteed income that is fixed until you die; and

　　3) Protection from falls in the value of the fund due to stockmarket movements

　　Those three qualities are the hallmark of a product that is already on the market - inflation-linked annuities. Hardly anybody buys them. Why? Because guarantees and inflation-linking are expensive. A 65-year old with a £100,000 pension pot can get an initial income of £5,900 with a flat-rate annuity; with an inflation-linked annuity, the income falls to £3,400. At current rates of inflation, it would take a long time before the deal would bring the retiree out ahead. (Of course, it might still be worth insuring against much higher inflation rates.)

　　But to understand the problem fully, you need to move futher down the NEST list. The next three priorities are

　　4) Ability to access lump sums when I want

　　5) Ability to pass money on to my dependents; and

　　6) The potential to increase my income if stockmarkets increase

　　None of those options are available with an inflation-linked annuity. But of course, they are not really compatible with the first three. You cannot gain from the stockmarket upside while being protected from the downside; you cannot have a guaranteed income for life and pass money on to your heirs and so on.

　　All this may simply prove that people are essentially like Mr Creosote, they want everything on the menu in a bucket with a fried egg on top. But the euphoria that greeted the reforms was a dangerous illusion; annuity rates are low because people live longer than before and because interest rates are low. People who think they can get higher incomes than annuity rates can only do so if they take more risk; risk that surveys show they don't like. Annuities are not perfect but as the Stones sang "You can't always get what you want but if you try sometimes, you get what you need".

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