UK - Current proposals to reform annuities are "inadequate" and are likely to benefit less than 5% of retirees, according the Association of British Insurers (ABI).
In a forthcoming paper on reforming the current system, the ABI suggests that a package of smaller reforms to the pensions system might be a more realistic way to improve choice and flexibility. The Association’s comments come ahead of the second reading of The Pensions Annuities Bill due today.
In its examination of annuity reforms, the paper concludes that given the launch of the Pensions Credit, coupled with the fact that many pensioners receiving annuity payments are on low incomes, current proposals that people buy an annuity to provide a weekly income of £140 is inadequate to keep people off state benefits. A more realistic minimum retirement income would only benefit a small minority of wealthier individuals - less than 5% of those retiring, said the Association.
Commenting on the proposals, the ABI said: “The key benefit of an annuity, providing the certainty of income for the rest of your lifetime, should not be under-estimated. The industry recognises the desire for greater flexibility to help boost retirement incomes, and is tackling this through introduction of innovative new products, such as investment-linked and impaired life annuities.
“It is important that any reforms to the current regime benefit as many people as possible. As current proposals only benefit a small number, a more wide ranging package of simpler reforms may be the way forward.”
By Madhu Kalia
The Pensions Regulator (TPR) has granted 11 master trusts extensions to apply for authorisation, as it confirms it has received 22 applications ahead of the 31 March deadline.
Aegon Master Trust, Fidelity Master Trust and Ensign have sent off their authorisation applications to The Pensions Regulator (TPR).
Self-administered pension funds spent £15bn on payments to pensioners in Q4 2018, but received just £12bn in contributions (net of refunds), Office for National Statistics (ONS) data reveals.
Aberdeen Standard Investments (ASI) and Gresham House are to team up to form a joint venture.