The Government’s strict changes to Asps announced in the pre-Budget report may worsen annuity rates for poor people by pushing the wealthy back into the annuity pool.
Hargreaves Lansdown head of pensions research Tom McPhail says: “By making Asps less attractive, the Government will push rich people back into the annuity system which will have a negative impact on the annuity rates offered to poor people.
“The Government is making it worse for the low-earners they are so keen to help because they are preoccupied with closing off any possible avenue of helping the wealthy.”
William Burrows Annuities director Billy Burrows says the demand for annuities will increase now that Asps are less attractive but he believes that the Government’s decision will force companies to come up with inventive annuity products to cater for clients with different bank balances.
He says: “The fat cats are going to have to buy annuities but I think they will soon be priced to suit their situation. Companies will be looking at introducing different types of annuities.”
Burrows says the Government deserves to be criticised for mucking around people who have made responsible pension decisions.