DWP unveils annuities review
UK - The Department for Work & Pensions (DWP) and the Inland Revenue have published a review document that aims to modernise pension annuities, giving pensioners more choice, information and control over their retirement income.
Ruth Kelly, economic secretary to the Treasury and Alistair Darling, the Secretary of State for Work and Pensions, issued the joint document setting out the government's objectives for its annuities modernisation program:
* Increasing the level of retirement income that people can expect to gain through an annuity
* Ensuring that funds saved with the benefit of tax relief are used to provide a secure income in retirement. Pensioners can not be allowed to become a burden on the social security system - as such, people will only be able to use their funds for their retirement income
* Annuity reform should complement the Government's aim of encouraging people to save more for their own retirements. The Government is keen that people should understand annuitisation and the options on offer so that they make the right choices and receive good value.
To facilitate the reform process, the government says it will take legal powers that will allow for a wider range of annuities to be used as the market develops. New products that arise through the consultation process and which satisfy the government will be able to be introduced quickly and easily as a result.
Darling said of the consultation paper: It looks at ways of making the annuities market work more effectively, helping everyone buy products that meet their needs and achieve good value. Reform is necessary to make the annuities market work better, so that consumers are better informed and able to choose annuities that provide good value. Providers also need greater flexibility to provide a wider range of products.”
The Actuarial Profession welcomed the review, claiming that it would provide a focal point for the discussion on annuity reform. The profession was especially pleased with the government’s proposals to consider widen the choice of options available.
Leslie Gray, chairman of the Profession's working party, said: Annuities will remain the preferred choice for many approaching retirement but our analysis showed that they could be more attractive if they offered more payment flexibility and more choice in the level of inheritability. These tend to be restricted by current legislation.
By Geoffrey Ho
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