The compulsory purchase of annuities at the age of 75 must be scrapped. This belief was expressed by a panel of UK industry experts who met at Skandia Life's recent Pathfinder Forum.
The panel, consisting of Nicola Horlick, joint managing director of Societe Generale, Paul Myners, chairman of Gartmore, Professor Tim Congdon, managing director of Lombard Street Research and Michael Hughes, chief investment officer at Baring Asset Management, agreed that if pensioners are to get full value from their pension investments the purchase of annuities at the age of 75 must be scrapped.
Michael Hughes explained that in a world of ongoing lower inflation and lower annuity rates, consumers need more flexibility in the way they manage long term savings. “An element of guarantee must still be built into a retirement income because investors need that degree of certainty, but the combination of that and having sufficient and relevant flexibility means there is scope to develop much more relevant products that we have seen to date,” he said.
Myners said that Irish pensions law could become a blueprint for finance managers and investors. “The law in Ireland requires only that you purchase an annuity with your accumulated retirement funds, if you save more than that then you need not convert more of your pension into the annuity,” he said.
“This would be a perfectly rational response from a government which says ‘we provide tax incentives to encourage you to save so you are not a burden on the state upon retirement.’”
By Janet Du Chenne
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This week's edition of Professional Pensions is out now.
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