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Thinktank proposes advice for all before buying annuity

An influential pension consultant is putting forward a plan for everyone to get independent financial advice before buying an annuity.

Thinktank Pension Policy Institute governor Dr Ros Altmann has suggested to Downing Street and the Treasury that providers should push all pensioners through an independent advisory process before they buy an annuity.

The proposal is understood to be under serious consideration by Government officials.

Altmann says annuity contracts already carry a 1-1.4 per cent charge for commission but most people do not take any advice or use the open market option.

If policyholders do not want advice, Altmann wants providers to show their own rates alongside the best rates on the market to press individuals to get a better deal.

She suggests annuities should extend “moneyback guarantees”, which will protect at least some of the investor&#39s capital in the event of death. She says guarantees can be offered at a cost of up to 16 per cent by the age of 75 on figures costed by one provider.

The Bureaux director Ronnie Lymburn says: “One of the problems with annuities is that the pricing is obscure.”

Britannic Retirement Solutions corporate development director Bob Bullivant says: “The problem at the moment is that it is easier not to exercise the open market option than to exercise it. But 1 per cent does not give you enough room for full advice so we need to simplify the system.”

Altmann says: “The ideal is that everyone gets independent financial advice but it does not have to be complex advice. There are basic questions people need to consider.

“The funding for advice is already there. At least two in three people do not exercise their Omo but they are paying for advice.”

•Comment, p37

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