Who is retiring gracefully?

2012-06-25 08:21

Chris Moerdyk

I notice that after a few years of inactivity, retirement annuity policies are starting to be advertised by the big insurance companies again.

After having been a victim of retirement annuities and seeing others suffering the same fate a few years ago, I have told my children in no uncertain terms that if they buy a retirement annuity policy I will disown them.

I have suggested that they rather buy shares in the insurance company because that way they will make a lot more money.

Now, I've always thought that those big, bold health warnings on cigarette packets were a waste of time because even a brain dead newt knows that smoking is bad for you. The same applies to warnings that are about to be slapped all over liquor bottles. They're all stating the obvious and are nothing more than a rather futile attempt at curing cancer with a Band Aid.

Snake oil salesmen

But, there are some products that desperately need health warning stickers.  Like pension, retirement annuity and all sorts of other investment products sold to us by modern day snake oil salesmen.

Advertisements and policy documents should be clearly labelled: "Warning - You Are Now Gambling." Because, that's what it is really all about. Nothing more, nothing less.

It was about six or seven years ago that a parliamentary committee heard one horror story after the other about pension fund fees and just before that, the then Finance Minister, Trevor Manuel,  lashed out publicly at the "horrendous" fees charged by life assurance companies for retirement annuities.

Round about that time I made a concerted effort to ask family and colleagues at retirement age whether they were happy with what their annuities would  pay out and I not found a single person who is even remotely satisfied.

They were all furious in fact, with a lot of them actually getting out less than they paid in.

Disgusting marketing

One of these was former media chief executive, financial journalist and now columnist for the Business Times, Stephen Mulholland.

In a delightfully acerbic column at the time he wrote: "When I think of the years and years of contributions I made to annuities that now pay me a pittance, I could weep.

"We often forget," he added, "that insurance is nothing more or less, than a vast casino."

The way in which these things are marketed is nothing short of disgusting quite frankly.

First of all, the brochures and ads all have big bold charts showing that if you invest X amount for Y number of years you will end up as rich as Croesus and all your worries about retirement, education fees for the kids and being able to flit about on overseas holidays,  will disappear.

Nothing new

My wife and I bought one of those tertiary education policies when our youngest kid was born. By the time he started high school our financial advisor calculated that by the time he started university the policy would actually pay out just enough for about a year.

Shortly after that the same financial advisor suggested I get rid of my retirement annuity policies, so I called the insurance agent who had sold them to me. His immediate response was: "Wow, have you still got those things - I dumped mine years ago - they're useless."

This is all nothing new of course. More than a century ago Ambrose Bierce wrote about insurance as "an ingenious modern game of chance in which the player is permitted to enjoy the comfortable conviction that he is beating the man who keeps the table."

Nothing has changed.   

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