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ABI wants &#39greater flexibility&#39 on annuity guarantees

Almost half of UK consumers are either very or fairly interested in receiving a money-back guarantee on their annuity purchase and are willing to accept reduced rates if this concession is allowed, according to research from the ABI.

The main reason why 47 per cent of respondents to the trade body&#39s recent survey said they wanted access to guarantees is because they are concerned about getting value for money that will not disappear if they die soon after they have purchased their annuity.

Currently, moneyback guarantees are available but only for fixed fiveor 10-year periods. The ABI is calling for guarantees to be allowed without any restrictions on their terms and for lump sums of the balance of the annuity to be paid upon death rather than in instalments over time.

Although a Treasury consultation on annuities was completed last year, it is expected that any reform has now become part of the bigger pensions Green Paper due to be published in November.

Other findings point to the fact that 44 per cent of current annuitants rely on the state pension as the main source of their income.

The research was conducted on behalf of the ABI by IFF research. Interviews were conducted in May 2002 with 500 people who have purchased an annuity in the last three years and 101 retirees who have yet to annuitise their pension fund.

ABI head of pensions Joanne Segars says: “We want to see greater flexibility, particularly for those who are concerned to ensure value for money from their annuity if they die soon after purchase.”

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