ABI calls for increase in annuitisation age to 80
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The Association of British Insurers has called for the maximum age by which people are required to have purchased an annuity or an alternatively secured pension to be increased from 75 to 80.
In policy proposals published today, the ABI also calls for action to address the problem of “stranded pots” by harmonising rules for occupational and contract-based DC pensions.
The ABI would like to see an increase in the income allowance for ASPs and is calling for further development of value protection annnuities and products that provide a lifetime income guarantee.
The ABI is also calling for the introduction of measures to encourage married and partnered couples to consider their joint retirement income needs.
ABI acting director general Maggie Craig says: “The UK pensions landscape is undergoing huge change, with the numbers drawing benefits from DC pensions savings in 2010 set to exceed 500,000.
“The good news is that these people can expect to live longer. However, this improvement brings new pressures, which means the current rules and regulations are not fit for purpose.
“The savings industry is keen to rise to the challenge and meet the needs of Britain’s savers. Our proposals would make a real difference and help ensure people retiring from DC schemes get the most from their savings.”
Hargreaves Lansdown head of pensions research Tom McPhail adds: “The current retirement income rules are out of date, highly restrictive and place far too little emphasis on helping people make the most of their DC pension savings. The Government has overlooked this issue for too long and the ABI’s proposals provide some welcome fresh thinking.
“With the minimum age for taking pension benefits set to increase in 2010, there is no excuse for the Government not to raise the ‘age 75’ threshold to 80. Equally, the ABI’s proposals to allow value protection on annuities beyond age 75 and simplify how people can take their pension benefits would deliver real and immediate consumer benefits.”
Readers' comments (6)
Anonymous | 4 Jan 2010 12:25 pm
I'd like to agree with the proposals, but do we really think that this issue will take any precedence under current economic conditions and with a likely change of Government imminent?
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Julian Stevens | 4 Jan 2010 12:26 pm
The ABI should be lobbying for the total abolition of the annuity trap. Obviously, its board has no idea at all of just what it's like out here trying to pull together a motley assortment of funds to arrange an annuity in a market that's constantly shifting like quicksand.
And anyway, what's the use of lobbying this government on anything to do with pensions?
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Richard Brown, Managing Director, Moneynotion Limi | 4 Jan 2010 12:49 pm
If we HAVE to have an annuity, I couldn't agree more with the ABI though, in an era when we all expect to live longer, why have an upper age limit at all?
I like the USA's 401K rules, which (simplified) limit the amount of cash one can draw each year as an actuarial proportion of the total fund. This allows continued investment participation, though it does expose one to loss as well as gain.
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John Shackleton | 4 Jan 2010 1:02 pm
The big issue we have is that the people who create this restrictive legislation are wholly unaffected. Perhaps if they had to take their benefits as DC under the current DC regulations they may start to understand that the industry is talking about real issues faced by real people!
Why 80? Just remove it anyway and as you say Tom, allow the industry scope to innovate. I just hope the coming election will provide us with ministers who will listen and act very quickly!
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Bob Perry | 4 Jan 2010 1:05 pm
Why do we need ASP? Is it a nanny state or envious civil servants?
USP works and for those who do not want the investment risks associated with USP we have a range of annuities.
We do not need more complications. Please let advisers and clients work together to select the most appropriate solution.
Pensions have become too complicated and future generations will suddenly find they have insufficient income in retirement. We must simplify pensions to encourage greater savings.
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David Trenner - Intelligent Pensions | 5 Jan 2010 11:40 am
Yes to simplification, yes to a higher age for compulsory annuitisation, but lets not forget mortality drag!
From about age 70 the critical yield for drawdown gets significantly higher, and most clients should be annuitising before 75. For those who really do not need the income making them buy an annuity or ASP at 75 is crazy, but there are very few people out there to whom this applies.
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