The ABI has written to life office chief executives advising them to lobby for the relaxation of compulsory purchase annuity rules and abandon developing innovative products within the existing framework.
Some commentators believe the move indicates the Government may relent on its position outlined in this year's Budget report, where the Treasury ruled out substantial reforms on cost grounds. At the time, the Treasury invited the industry to come up with solutions within the age 75 compulsory purchase limit. The letter, from ABI head of pensions department Alan Woods, goes so far as to suggest any move to work for increased flexibility within the current annuity rules is a “backwards step”.
Woods writes: “The Govern-ment is giving stronger indications that it is willing to consider the possibility of relaxing the current rules in ways which would allow for/encourage more innovation in product design.”
He adds: “If there is a chance Government may relax the rules, the industry and Revenue should focus on that rather than negotiating the boundaries of the current rules.”
Winterthur Life pensions strategy manager Mike Morrison says: “It is now up to the industry to put forward coherent and well thought-out alternatives.”
Annuity Bureau financial adviser Steve Chilcott says: “This is not surprising, given male mortality is catching up with female mortality every month. Upping the age to 80 would help clients for whom 75 is looming to plan for the future more easily.”