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‘Poor should not pay for the rich’

NPSS savers should not be forced to subsidise the rich by being herded into annuities, says IMA chief executive Richard Saunders.

Speaking at the Money Marketing/Cicero pension summit in London last week, Saunders argued that low-income NPSS savers with lower life expectancy will end up paying for the retirement incomes of the rich if pushed into an annuity when they retire.

Saunders called for greater focus on decumulation in the NPSS debate. He said: “It is not too early too start thinking about the decumulation phase. The population of NPSS savers will not live as long as people on higher incomes. Should they really be subsidising the rest of the population through annuities?

“We have to ask whether the existing structure of annuities is fit for purpose. The NPSS gives us an opportunity to change this.”

Former Tory MP Howard Flight said the whole concept of annuitisation was insulting to people on lower incomes and said the Government should not ignore the ability to pass money on to children as a major incentive for people to save.

He said the UK pensions system could emulate the 401K pensions system in the US, where savers do not have to buy an annuity and can with draw funds when necessary.

Flight said: “The Treasury or the Revenue is stuck with this obsession about buying an annuity. The logic of annuities is most unpleasantly pernicious and insulting. It assumes people will blow all their money before they die so they have to rely on the state. Many people with small savings do not want to receive a measly amount of income per year from an annuity.”

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