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Standard scorns lack of annuity consultation

The Government&#39s proposals for annuity reform do not leave room for consultation despite its claim it is open to ideas from the industry, claims Standard Life.

Standard disagrees with the Government&#39s plans and has its own set of reforms which it believes would do a better job of motivating people to save for retirement.

Rich pensioners who do not need their pension pot for income would be allowed to take the majority of their lump sum but would be required to leave a minimum £50,000 in the fund. If they chose this route, they would lose the original pension tax relief but not be compelled to buy an annuity.

The £50,000 would be used to buy an annuity if the rest of the money was spent or would be passed on upon death.

Lower earners with a pension of less than £10,000 would be allowed to take the entire amount instead of being forced into an annuity which would pay them a minimal income. Given that an individual with this amount in their pension would be likely to have to rely on state assistance, Standard says the payment would allow them to clear debts or make home improvements at the beginning of their retirement years.

However, for the bulk of the population, Standard believes conventional annuities are still the best way to provide an income in retirement.

The life office says if transferring between providers is allowed, there will need to be two markets, with only one allowing transfers. When buying an annuity, the consumer would have to decide which market they wanted to be in or the sustainability of a provider&#39s annuity book might be threatened.

Senior technical manager John Lawson says: “There is not a lot of scope within the Treasury&#39s consultation paper for comment. They have laid down two basic structures rather than having an open consultation.”

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