A change in the rules on the obligatory purchase of an annuity seems inevitable.
The Choices paper on annuity reform by Dr Oonagh McDonald has tapped into a seam of desire for change. Those wanting to keep the status quo are becoming thin on the ground.
The issue is of such core importance for Middle England that the debate could even reach election manifestoes – one of McDonald's aims.
But some commentators believe the Government has yet to come out with any concrete proposals because it wants to let the debate proceed before committing itself.
Others are moving more quickly. Conservative MP John Butterfill's private member's bill is scheduled for its second reading on March 9 and his proposals are echoed in former Labour MP McDonald's paper.
Many in the financial services industry support the direction of the reforms, as do the Liberal Democrats.
LibDem MP Vincent Cable says: “We raised the issue in the House of Commons two years ago. Steve Webb and I got a long adjournment in a debate over the issue. At the time, the Government undertook to deal with the antiquated regulations and bring an end to this paternalistic system.”
A Treasury spokesman says: “We are looking at the issue and the way forward. But we have a lot of issues in this area such as the minimum funding requirement, pension misselling and annuities. We think it is sensible to tie all these strands together in one large announcement. But we have no idea of the timetable for any announcement.”
The Treasury's principal concern is that people will blow their retirement provision in a spending spree.
Butterfill's bill proposes that people are given the freedom to spend the money how they want after buying an index-linked annuity up to the level of the minimum income guarantee to ensure that they do not have to fall back on state benefits.
After April, when the Mig rises to £92.15 for a man, an annuity to cover this figure would cost a 65-year-old man around £70,000. Under Butterfill's proposals, the remainder of the pension fund would be paid to the individual as a tax-free lump sum.
But there are some annuity experts who, like the Treasury, remain cautious.
Morestead director William Burrows believes there should be a debate about compulsion. He says: “Forcing people to buy an annuity equivalent to the minimum income guarantee at the age of 65 would give them less flexibility than they already have. The average annuity purchase price is £30,000.A Mig would cost £70,000.”
Those looking to change the system already have a real situation to study. The Rep-ublic of Ireland relaxed its laws on the mandatory purchase of annuities in 1999 and so far the rule changes have been popular.
Initially, the rules applied only to the self-employed and directors holding a substantial stake in their own companies but they have been extended to cover all those paying additional voluntary contributions.
The Irish system allows pension funds to be invested in approved retirement funds (Arfs) which some banks and institutions are offering.
The rules for making financial services products into an Arf are very straightforward, resulting in a wide range of products being made available to those investing their pensions.
Mercer Irish Pension Trust director Alan Broxson says: “You could put the whole lot on the five o'clock at Ascot but there have been no reports of that happening. It has not been a good year for equities but it is early days yet and the people who are using these funds are fairly astute.”
Mercer head of retirement research Paul Kenny says: “The rule changes have been exceedingly popular. People with ongoing care of dependent physically or mentally handicapped children are particularly happy that they can pass on their funds to them when they die.”
Kenny says: “The other area of particular benefit is for people who do not need the income from their annuity because they have other sources of income. They can then pass on the benefits of their pension fund to their families.”