Intelligent Pensions has warned advisers not to lose sight of the fact that most clients will need to purchase an annuity by 75 even if the Association of British Insurers’ call to raise the maximum age for buying an annuity to 80 is realised.
Last week, the ABI called for the age for compulsory annuitisation or conversion to alternatively secured pension to be raised from 75 to80.
Intelligent Pensions technical director David Trenner says that he supports the ABI’s stance but advisers must remember that if the age is pushed back, it would only be suitable to delay annuitisation for a small minority.
He points out that within an annuity pool, those dying earlier subsidise the incomes of those who live longer. He says Government Actuary’s Department figures show mortality cross-subsidy is worth about 1 per cent a year at 60 but rises to around 4 per cent a year at 75.
Trenner says: “For the vast majority of clients, annuities should be purchased before age 75. Treating customers fairly means that we have to make sure that they understand the value of annuities.
“The ABI is right to push for an increase in the age limit but we must ensure that if the age limit is increased we as advisers do not lose sight of the fact that good financial advice means that the change will only affect a very small number of our clients.”