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&#39Keep money-back annuities simple&#39

The Annuity Bureau is urging the Government to keep money-back annuity products as simple as possible and says they could provide the answer to many of the criticisms of annuities.

It says money-back annuities already exist in the form of purchased life annuities.

These are voluntary annuities bought with an individual&#39s own funds to supplement income and have an option for the balance of the original amount invested to be returned on death.

The bureau says that because a structure is already in place with purchased life annuities, there should be no problems with making a money-back annuity a mainstream product.

It believes that if the product and the taxation of the capital sum on death is kept simple, money-back annuities should appeal to people with any size of pension fund.

The company says life offices will have to work hard to make sure the drop in income is small enough for the product to stay attractive.

It predicts that the income for a male aged 65 is likely to be 5 per cent less than from a traditional annuity.

Managing director Peter Quinton says: “There are likely to be differences in the taxation of payment of income on death between the purchased life annuity and the proposed money-back pension annuity.

“I would urge the Government to keep this product simple.”

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