In its consultation paper on decumulation, Pada proposes forming a panel of providers who will be obligated to offer annuities to all scheme members with pension pots over the trivial commutation limit of £2000. But it also assumes lifetime annuities will be the best option for the vast majority of scheme members.
Pensions analyst Nigel Callaghan says investors must be able to choose from the entire array of decumulation options, particularly impaired and enhanced annuities.
He says: “We have major concerns that the focus of the consultation is very much on conventional lifetime annuities. With an annual contribution rate of 8 per cent many personal account investors will be much better served by considering all their options, including specialist annuities such as short-term annuities, impaired annuities and drawdown and not being press-ganged into the automatic purchase of a lifetime annuity. Without this full market choice any benefit derived from low charges during the accumulation phase may well be lost through inefficient decumulation.”