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Annuity reform plans are doomed to fail, says ABI

All three proposals to reform the annuity regime are unlikely to succeed because they fail to address key Government concerns, claims the ABI in its quarterly insurance review.

In the article – Reforming Annuities: Big Bang or Softly, Softly? – the ABI says it is unlikely that any of the three proposals will be satisfactory to the Treasury because they do not meet its standards for being revenue-neutral and being effective for everyone.

The article, written by ABI senior economist Chris Curry and policy adviser Julie Stark, says both the retirement income reform campaign, headed by Dr Oonagh McDonald and the Faculty and Institute of Actuaries&#39 proposals will be applicable to less than 5 per cent of people.

The third proposition from business services consultancy Tenon Group, would cost the Treasury money and could result in very low income for some pensioners, says the ABI.

The review criticises decision trees for annuities, claiming they would not be effective in helping pensioners be more aware of their options.

“Providing better access to advice will not be easy and the range of types of consumer will need to be taken into account. This is not something that can be solved by decision trees…a holistic approach should be taken to retirement planning taking into account all of the consumer&#39s savings. Only a fin-ancial adviser (and not a decision tree) can take such an approach,” it says.

A Treasury spokesman says: “There have been a number of proposals put forward for annuity reform. We have had concerns with them because they would only benefit the wealthy.”

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