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Treasury rejects pleas for annuity reforms

Industry hopes of annuity reform have been dashed by the Chancellor over Treasury fears that changes would cost hundreds of millions of pounds.

In the Budget statement, the Treasury rules out a review after costing alternatives put forward, including Dr Oonagh McDonald&#39s Retirement Income Reform Campaign.

Brown had been widely tipped to announce a wide-ranging review of post-retirement income, with many industry experts expecting the introduction of an interim measure increasing the age of compulsory annuity purchase to 80 from 75 before more fundamental reform.

Instead, the Treasury plans to rely on the industry to develop products and highlights the need to encourage savers to take the open market option when purchasing an annuity.

McDonald says: “The suggested reforms will not all cost hundreds of millions. The Government has fundamentally not understood the proposals in the Choices paper.”

Wentworth Rose managing director Philip Rose says: “This clearly shows the Government has not heard the message. It is a shame that there has been some reporting that this Budget would abolish annuities. This means that some people could have put off buying an annuity.

“With the unprecedented step of paying off £34bn of debt, this is likely to lead to gilt repurchase and people are likely to have to buy at lower rates than before.”

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