Pension providers have called on the Government to relax rules on annuity product design in the wake of Chancellor George Osborne’s radical retirement overhaul.
Responses to the Treasury’s consultation on the Budget reforms have largely focused on the controversial guidance guarantee due to be introduced in April 2015.
Aviva head of policy John Lawson says: “Treasury should just be concerned with how they tax income that comes out of products. We would say ‘allow us complete flexibility to design products that meet customers needs’.
“At the moment you don’t have that flexibility.”
Although annuities can be linked to variables such as inflation, the rate cannot go down.
Providers say disability-linked annuities, where a client being registered disabled would trigger a rate increase, or so-called U-shaped annuities could be made available if retirement income rules were more flexible.
MGM Advantage pensions technical director Andrew Tully says: “We’d like the flexibility to ask customers what exactly they want and then we can design it that way. Some people might want a U-shaped annuity or might like the ability to take a lump sum out of an annuity.”
Just Retirement group external affairs and customer insight director Stephen Lowe says: “At the moment an annuity income cannot go down. We’d ask of Treasury that they create a level playing field between what you can do in a drawdown environment and what you can do inside a guaranteed secure income environment.
“The best thing Treasury and HMRC could do is tear up the existing rule book. Suddenly you could start to see greater product innovation. Because it is not a lack of creativity, it is a restriction that stops you doing it today.”