View more on these topics

‘Murky annuity market’ costs workers £1bn a year

Private sector workers are taking a £1bn hit on their pension incomes every year as a result of the “hugely unfair and opaque” annuity system, a new report claims.

The joint report by the National Association of Pension Funds and the Cass Business School calls for a range of fundamental reforms to the way people shop around for a retirement income.

These include building a shopping-around process into all pension schemes, increasing transparency in annuity pricing, commission and retention of business and increasing the Government’s scrutiny of the annuity market.

NAPF chief executive Joanne Segars says: “The annuity market desperately needs to be straightened out if the UK is to pay for its old age. People are saving throughout their working lives, only to end up short-changed by a toxic system.

“Every year, £1bn that could have been paid out in pensions instead disappears down the plughole of a murky annuity market. The way the market is priced and structured must become more transparent and people need stronger support in picking the right annuity. The Government and the industry must work harder to create a clearer, fairer system that delivers better value for money.”

Cass Business School director Professor David Blake says: “This report is a wake-up call. If the annuity system is not overhauled, employees in defined contribution schemes in the private sector will continue to suffer massive detriment and the Government’s new auto-enrolment regime will fail the very people it aims to help secure financial independence in retirement.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “We need to introduce an easily accessible directory of shopping-around brokers to help investors, particularly those with small pension pots.”

Recommended

‘Warning notices will treat firms like would-be criminals’

The Financial Conduct Authority’s powers to publicise early warning notices will treat firms and individuals like “would-be criminals”, says City of London Conservative MP Mark Field. The Financial Services Bill will give the FCA the power to publicise the details of firms and individuals it is investigating at the warning notice stage. The bill also […]

Putting the lights on

All the kerfuffle over Stephen Hester’s bonus ignores one key point. I wonder how many people would voluntarily give up significant income they had been promised for doing their job, particularly how many of the most vociferous critics? It recently emerged that some of the biggest critics of tax planning in family companies are using […]

New directory launches for online advice sources

A new directory of online advice services has been launched covering independent, restricted and simplified advice firms alongside money coaching and execution-only services Guide to Advice is a portal for consumers and financial services professionals which provides information about different advisers’ propositions and a rating based on each website’s functionality and usability. The service has […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment