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Brave annuity world

Acres of newsprint have been devoted to Gordon Brown&#39s Budget, so a few more inches will not hurt.

It is trite to say that this is the most significant Budget produced by Brown since he became Chancellor. The headlines were grabbed by his gamble in raising National Insurance contributions to pay for the National Health Service. But, as always, it pays to read the small print to get a steer on how things are progressing in other areas.

By far the clearest steer was given on the progress being made in the never-ending debate about the future of annuities. The Budget report effectively gave the headline conclusions resulting from the recent consultation on annuity reform. The Government has come to the headline-grabbing conclusion that choice should be increased for consumers in the annuity market.

This does not only include choice for annuity providers, of course, but also choice in changing the nature of your annuity from a flat rate to an index-linked rate later on.

This will, of course, provide IFAs with another chance to give advice to customers who were sailing off into the wild blue yonder, having taken out a once-and-for-all annuity. In addition, limited-period annuities are flagged up as a potential new product.

Sadly, no mention is made of the proposal for an annuity that returns the balance to your estate after death but I am confident that it will emerge in the near future.

Greater openness and competition in annuities is just around the corner. The FSA will publish proposals to ensure that people are informed of their entitlement to buy an annuity from a different provider. Pension campaigner Frank Field MP has also latched on to the issue, publishing an early day motion in the week of the Budget calling for a similar proposal.

He is also planning, perhaps prematurely, to publish a private member&#39s bill on the same subject. Now that Field has addressed the issue, you can be sure there will be more innovative thinking from that camp.

Talking of bills, yet again, the Government has confirmed, as if it needed to, that the Curry Bill is dead. It has tried to drive a stake through its heart on two occasions and will do so again shortly.

As I have written before, the Government&#39s view is simple (perhaps too simple for some) – an annuity is an annuity is an annuity, so stop trying to make it something it is not.

Dogs that did not bark included child trust funds and Isas. The Government confirmed that it will take a final view of the child trust fund in the run-up to next year&#39s Budget. This consultation has dragged on endlessly and I imagine it is bogged down, not because of the principle but because of the potential up-front expenditure that it could imply.

As yet, there appears to be no sign of an Isa review and it may be that it gets tied up with child trust funds. There has been lots of gossip about a child Isa being a potential vehicle for saving for children and it may be that two products are created for this purpose.

Finally, of course, there was no mention of specific proposals on pensions. The final outlook will be set out in the Pickering and Sandler reports. However, there is little doubt that these reviews will address the mounting concern over the fate of occupational pension schemes. To cut down on the regulatory costs of such schemes and to get rid of some of the anomalies that have over-complicated them is a matter of some urgency.

All this is devilish detail. The reform programme for financial services has been so ongoing that we are in danger of losing the big picture. Stakeholder pensions, Isas and other financial reforms have been a great success but we also need to step back and consider the wider issues. From a personal perspective, I see the ever-growing list of tax credits and the continued tweaking of the state second pension and minimum income guarantee as providing ever greater fog and complication over what people need to do to ensure a stable income throughout their lives – studying, working and in retirement.

The Faculty & Institute of Actuaries held a meeting last week which was attended by the great and the good from the financial services industry, including senior representatives from the FSA, the Inland Revenue and the Treasury.

The purpose was to discuss Deborah Cooper&#39s paper on Saving for Retirement, which allows you to try and assess how much and, more crucially, when to save to try and enjoy a stable income throughout life. The paper (and this was its purpose) raised far more questions than it answered, showing, for example, that in some circumstances, it makes sense to do serious saving near the end of one&#39s career.

This is when the children have left home, there are far fewer financial obligations and both partners are earning again. It also made the point, of course, that saving comes in many forms. It is not just about a pension but also about paying off a mortgage, saving in an Isa or even not saving at all.

With this in mind, the whole debate on compulsory saving for a pension needs to be considered carefully.

Field&#39s pension reform group will publish its report on compulsion soon, which will contain further refinements on his original compulsion idea to help reduce costs.

A lot of tinkering and intense debate continues in many areas of saving but no one as yet has come up with any big idea to ensure that we can all be confident that we are providing enough for ourselves.

Maybe the time has come to think outside of the products and to look at some scheme which will enable us to shelter money from the taxman, invest it wisely and have access to it in appropriate circumstances. Alternatively, the Chancellor could just cut taxes and let us get on with it.

Edward Vaizey is a partner and board director (public affairs) at Consolidated Communications


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