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Anger as annuities left unchanged

The Chancellor has dashed industry hopes of a review into the annuity market, over Treasury fears it would cost hundreds of millions to implement.

In the Budget statement the Treasury says it has ruled out such a move after costing the alternatives proposed by interested parties including Dr Oonagh McDonald’s Retirement Income Reform Campaign.

The Treasury’s inaction has come under fire from pro-reformists, who have questioned whether the Chancellor Gordon Brown has fully understood the arguments put forward and have vowed to fight on.

Brown had been widely tipped to announce a wide ranging review of post retirement income with many industry experts expecting the introduction of an interim measure increasing the age of compulsory annuity purchase to 80 from 75 before more fundamental reform.

Instead the Treasury plans to rely on the industry to develop products to deal with the annuity problem and highlights the need to encourage savers to take the open market option when purchasing an annuity.

Retirement Income Reform Campaign director Dr Oonagh McDonald says: “The suggested reforms will not all cost hundreds of millions. The Government has fundamentally not understood the proposals in the Choices paper.”

Wentworth Rose managing director Philip Rose says: “This clearly shows the Government has not heard the message. It is a shame that there has been some reporting that this budget would abolish annuities, this means some people could have put off buying an annuity. With the unprecedented step of paying-off of £34bn of debt, this is likely to lead to gilt repurchase, and people are likely to have to buy at lower rates than before.”

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