Annuity bill ups pressure for reform
UK - Pressure has grown on the government to reform annuity law after a private member's Bill passed a second reading in the House of Commons.
But a new report by the Association of British Insurers (ABI) claims the government will not budge on reforming annuities because any loosening of current legislation would cost the Treasury billions of pounds.
The Bill - spearheaded by Conservative MP David Curry - tackles two of the key criticisms of current annuity legislation. It proposes to raise the age at which an annuity has to be taken from 75 to 85, and to pass remaining funds to beneficiaries after death.
The Bill was widely expected to fail, with ministers deploying delaying tactics to time it out. But the government suffered an embarrassing defeat, with the Bill being passed by 139 votes to 27 after a forced vote.
A Conservative spokesman expressed doubt that the Bill, which now goes to committee stage, could get any further. He said: Without government backing, the Bill could die on reaching the committee stage. The government would have to amend it to be passed. And an ABI report published last week said the government wanted to legislate for the majority of annuitants but could not afford to make fundamental changes to current legislation.
ABI senior economist Chris Curry added: 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.
The government is due to release a consultation paper on annuity reform in at the start of February. But industry experts believe the introduction of pensions credit indicates there will be no fundamental shift away from the current annuity system.
By Shifa Rahman
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