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Diggle claims &#39monopoly&#39 is skewing the annuity market

There is a complex monopoly at work among retirement product providers which is distorting competition and damaging consumer interest, claims Inland Revenue senior civil servant Paula Diggle.

Speaking at the Pensions 2002 Roundtable in London this week, Diggle accused providers of belonging to a monopoly which is preventing new players from entering the annuity market.

Diggle, who is now head of savings and pensions policy at the Revenue and responsible for the tax implications of Government savings policy, was previously in charge of financial services at the Treasury and was behind initiatives such as Catmarks and individual pension accounts.

Product providers have rejected her claims, saying if there is an appearance of a monopoly it is because of restrictive Government policy which has limited the flexibility of providers.

Diggle said: “There are a number of firms who would like to get into the market but say they find it hard to get into it. It looks like it is a complex monopoly with a limited degree of innovation and competition skewed and distorted.”

She said the Government is looking to introduce primary legislation, possibly as soon as this year&#39s Finance Bill, which will give it enabling powers to recognise new annuity products introduced by providers in a more streamlined fashion.

Diggle also claimed that consumers should purchase an annuity by 70 rather than risk getting a worse deal by waiting until the age of 75.

Retirement Income Reform Campaign director Dr. Oonagh McDonald says: “Once you have created a market by legislation which is closed, it is difficult to have any competition. It is tax policy that has created the complex monopoly.”

Skandia group marketing manager Peter Jordan says: “If there is a monopoly, the Modernising Annuities paper is seeking to preserve it by retaining annuities. They seem to be against fundamental reform of the market.”

•Comment, p39

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