View more on these topics

&#39Brown is blind to annuity dilemma&#39

The Budget provided an ideal opportunity to amend the compulsory requirement to buy an annuity by the age of 75 for those with money-purchase schemes. It was a disappointment.

It appears everyone except Chancellor Gordon Brown knows that, at present, pensioners are finding that annuities leave them with less income than they had reasonably expected due to the low gilt rates generated by the fiscal surpluses resulting from Brown&#39s high taxes.

As a result, people are minimising their pension savings until the obligation to buy an annuity at the age of 75 is abolished. It is not the sort of message we want to be sending out to people – there are enough disincentives to save as it is.

Having carefully considered the recommendations of the Retirement Income Working Party chaired by Dr Oonagh McDonald, a Conservative Government will end the compulsory requirement to buy an annuity with the whole of an individual&#39s pension fund. We believe current and future pensioners are far better at making decisions about saving for their own retirement than Brown. Those with money-purchase schemes will only need to ensure they have a sufficient minimum income to keep them off state benefits. The remaining capital in the pension fund will be theirs to keep and, if they want, pass on to their children. It is only right that people with pension funds see no reason why they should hand over money to insurers that they feel should rightfully go to their heirs on their death.

Those who want to buy an annuity for certainty of income will still be free to do so – we are not abolishing annuities.

The reform of annuities must go hand in hand with a mission to cut the burdens being imposed on the pension industry over the past few years. It has had to wrestle with uncertainty over stakeholder pensions, the £5bn raid on pension funds and increasing red tape and complexity. One effect of the new burdens on personal and occupational pension schemes is an increase in the number of schemes closed to new members. For example, a report from the National Association of Pension Funds reveals that 17 per cent of final-salary pension schemes are now closed to new members (NAPF ann- ual survey 2000).

The result has been a massive decline in the number of new pension sch-emes. Since 1997, a total of 22,500 occupational pension schemes have been wound up and the number of new personal pension products has fallen from an average of nearly 30 a year between 1988 and 1996 to just 16 a year since 1997.

Much of the red tape is unnecessary and counter- productive in terms of achieving the Government&#39s objective of encouraging further private pension provision. The pension industry should be left to devise ways of managing pension funds while it is the Government&#39s job to lay the foundations that encourages private pensions to grow, not deteriorate.

If our wider objective is to make pension saving attractive and remove the disincentives, then ending the compulsory purchase of annuities and reducing complexity and red tape in the pension industry is surely the common sense we need.


ScotEq aims to boost protection

Scottish Equitable claims it is on course to take 10 per cent of the individual protection market by the end of 2001. ScotEq says this is double its original expectations for its protection product&#39s market share and its success is largely due to the response to the marketing campaign. The campaign included £163.100,000 of trade […]

Funds Direct – 7 Of The Best Isa

Monday, 19th March 2001.Type: Stocks and shares mini or maxi Isa.Aim: Income and growth by investing in unit trusts and Oeics.Minimum investment: £1,000.Maximum investment: £7,000.Catmarked: No.Investment choice: Investors choice of a maximum of 7 funds from approximately 1,300.Charges: None.Offer period: Until further notice.Commission: None.Tel: 08700 738393. 

New generation for friends

Blair goes into more detail: “There will not be with-profits on the stakeholder version of the plan, so 21 funds on this version and 20 on the stakeholder. I use about seven of these personally. The option to use the likes of Merrill Lynch externally puts them on a more even footing with those who […]

Britannia two-year cap on loan

Britannia Building Society is offering a mortgage capped for the first two years at 4.9 per cent. Benefits include 12 months free unemployment cover and a cash bonus every year under the society&#39s profit-sharing scheme. The mortgage is Mig-free for customers with a 10 per cent deposit. The loan reverts to Britannia&#39s variable rate of […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm