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Treasury &#39tinkering&#39at annuity changes

The Treasury has issued its long-awaited annuity consultation paper, proposing allowing annuity transfers and the creation of a limited term product.

Compulsory purchase at 75 remains and there are no changes to the rules prohib-iting handing down benefits to family other than spouses on death.

Treasury Economic Secretary Ruth Kelly says that the Government plans to allow providers more freedom in designing products.

Consumers would be allowed to purchase an annuity for fixed periods until 75 and would then have to buy a lifetime annuity.

Lifetime annuities could be transferred to other providers at given points, with the minister saying she wants to keep transfer fees to a minimum.

The consultation period closes on April 5, with any changes soon after the Budget.

Providers say the proposals merely tinker around the edges and say work needs to be done on the practicalities of transferring annuities.

Scottish Equitable pensions development manager Margaret Craig says: “This could lead to exercising an open market option every few years. They want simplification but this could end up more complicated. It reinforces the need for advice.”

Retirement Income Reform Campaign director Dr Oonagh McDonald says: “It seems the Government is committed to annuities which means you can have any type of retirement income as long as it is an annuity.

“It sounds a bit like Henry Ford&#39s theory of customer service – any colour as long as it is black.”

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