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Actuaries press radical alternative to annuities

A report by a Faculty and Institute of Actuaries working party is urging the Govern-ment to consider its radical proposals to revamp the current pension annuity rules.

In a paper published this week, the retirement choices working party unveils details of its personal distribution plan, which would be a guaranteed retirement income vehicle, doing away with compulsory annuity purchase.

The plan would require a change in legislation to allow retirement funds to be inves-ted and drawn from without restriction.

An annuity would only need to be purchased to secure an individual a minimum income, including state pension to ensure they are not a drain on the state. This could be purchased at any age after retirement but before the fund drops below the critical level to secure a lifelong income.

More generally, the actuaries are calling for greater choice of investment options for people at retirement, giving greater flexibility to minimise the reliance on state benefits.

The report gives a star rating to each of the existing and proposed retirement options, including those in the FIA report, plus Dr Oonagh Mc-Donald&#39s Choices paper. The ratings are based on the choice, security, inhabitability, flexibility, investment efficiency and cost-effectiveness that are offered to investors.

Working party chairman Leslie Gray says: “The Lab-our manifesto included a willingness to consider annuity changes. We need to be knoc-king on the door of the Government with the concepts in this paper.

“The basic message is that while there is a wide choice of saving options before retirement, after retirement there is practically none. Choice is essentially not being met by current regulation.”


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