Pada says the panel will prevent small pension pots being stranded as providers would be obligated to offer an annuity to all people with savings worth more than the trivial commutation limit, currently £2,000.
It is likely that members will enter their details onto the personal accounts website and choose an annuity from search results. Scheme members will also be made aware of the open market option and alternatives to annuities such as income drawdown plans.
But Pada believes that a lifetime annuity will be the preferred option for the vast majority of people. Chief executive Tim Jones says: “We are trying to reduce costs on both sides to make the economics of a £2,500 annuity work.”
William Burrows Annuities director Billy Burrows says: “This is a positive idea but the industry has to make sure these people are getting good rates. The Government needs to ensure that when these people come to retirement, they are getting good value for money.”
Annuity Direct director Stuart Bayliss says: “The panel is a good idea but Pada needs to ensure at least a few enhanced or impaired annuity providers are represented.”