Annuity Reform Not Enough

The Treasury have issued a paper proposing changes to the annuity market which they hope to promote more flexibility, innovation and choice at retirement.  As a side issue, it effectively 'pulls the rug from underneath' the Private Members Bill led by the Tories proposing more radical change covered by us last month. In simple terms, at retirement your pension fund is invested to buy a regular income called an annuity.  The amount that you receive, which is technically a return of part of your original capital and interest received, is the annuity.  Interest rates are low at present and we are living longer, so capital returns are spread over a longer period.  Also if you die when you are receiving your pension, unless you have a guaranteed term pension or have built in a spouses pension after your death, the annuity stops and the insurance company or provider retains your money as a windfall.  Therefore, many are not keen on saving for pensions in the restrictive environment.  You can delay the purchase of your pension until age 75, however many cannot afford to do that and others make a choice to not save in pensions and save by other means so that they have greater access to their money.  In a move to promote more flexibility and encourage people to save, they propose to try and reduce penalties for moving pensions for different companies and create a more competitive environment to benefit the saver. They will not however remove the age 75 rule, they will not allow more access to the cash value built in the fund, like they do in America.  In our opinion, this falls short of allowing real flexibility and choice at retirement and still forces the purchase of annuities at a time when perhaps people may not want to or be best advised to.  Find out more on "At Retirement Policies ".