View more on these topics

IFAs warn Kelly annuities are big disincentive to pension savings

The Government came under fire over its plans to reform the annuity regime at a public forum in London last week, with its critics claiming they will do nothing to motive people to invest in pensions.

The proposals would allow transfers between advisers and a limited period annuity but do not change compulsory purchase at 75.

Speaking at the Financial Services Forum, Treasury economic secretary Ruth Kelly defended the annuity proposals. She claimed they are designed to provide lower earners with more flexibility in retirement, while avoiding providing a tax break for the rich.

But Kelly was told by Aberdeen Asset Management marketing director of investment trusts Piers Currie that other countries, such as Ireland and the US, have scrapped the compulsory purchase of annuities, so there is no reason why the UK cannot follow their example.

Currie said: “It is a very British thing, this law which came into being in 1921. The Irish managed to do away with it. The Americans just say we will tax the sum and make our money that way.”

Two IFAs present at the event, modelled on BBC&#39s Question Time, said the reforms show the Government is out of touch with the attitudes of savers. Advisory & Brokerage Services managing director Gareth Marr said: “I think the fact on the street is definitely that the requirement to buy an annuity at 75 is a disincentive for people to go into pensions. I can give you case after case which says that.”

Hazlems Financial adviser Tim Schofield said: “If you want to encourage people these days to put money into a pension scheme, I think one of the major things you have to look at is to take away the compulsion to buy an annuity.”

Shadow Paymaster General Howard Flight and Liberal Democrat trade and industry spokesman Vincent Cable, who were on the panel with Kelly, also rejected the minister&#39s claim, saying the plans do not go far enough.

But Kelly said: “What I think you would do by abolishing the requirement to buy an annuity is to encourage higher-rate taxpayers to shift money into pension funds for the purpose of not providing themselves with a secure and steady income in retirement but for something other than that.”

Recommended

IFAP guides the way to getting on the net

IFA Promotion has published the third edition of its guide to help IFAs get their business online and make the most of an internet presence.IFAP itself has seen the number of online referrals increase dramatically over the past two years with 70 per cent of enquiries now handled on the internet.It says that only around […]

Widows shows how to save tax

Scottish Widows is offering a toolkit to help IFAs capitalise on tax-saving opportunities for their clients&#39 personal and stakeholder pensions.The Maximise the Tax Factor marketing pack is aimed at allowing IFAs to identify potential business while highlighting the tax benefits of pension savings.It contains information the benefits of a pension as a long-term tax-efficient savings […]

Independent view: Donna Bradshaw

There have been a couple of occasions when I have been scratching my head trying to think of a topic to write about for this column – not this time.Of all the hot potatoes around at the moment, as an IFA it is hard to get away from CP121 as a subject for comment, so […]

L&G takes steps in bid to boost with-profits bonds

Legal & General is offering a step-by-step guide to with-profits bonds in to boost the popularity of the investment among the public.The guide, which has been awarded a crystal mark by the Plain English Campaign, covers areas such as the history of with-profits bonds, what they are and what they aim to achieve.It explains what […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com