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Webb calls for protection for older retirees on cash for annuities


Former pensions minister Steve Webb says the Government should consider introducing extra protection for older retirees accessing the secondary annuity market and the wider pension freedoms reforms.

Since the Treasury launched its consultation on the secondary annuity market in March, concerns have been raised that older people could struggle to understand what represents a ‘good price’ for their annuity.

Speaking to Money Marketing, Webb says: “We need to think about the ability of those in later retirement, and how this interacts with the freedom and choice reforms. It is fine to say at 55 savers can have a mix of whatever investment options they want. But should we expect consumers to go on reviewing that throughout their entire retirement without some additional prod, default or nudge? The position of the older retired will need to be looked at for these reasons.”

He argues there may be occasions when savers want to cash in their annuity, despite the price on offer being below what an actuary deems fair.

Webb says: “It’s going back to the old ways to say an income for life is the only proper choice. We have to be slightly careful not to be stuck in the old paternalistic ways of knowing what’s best.”

He suggests the industry code on enhanced transfer values, which states ETVs should only be offered to those over 80 years old on an opt-in basis, could be used as a guide.

Webb also thinks Pension Wise sessions could include guidance on selling annuities and believes there will be a supply of advisers prepared to specialise in the market.

He says: “Guidance can absolutely work here. Just as Pension Wise will tell savers about the tax consequences and try to make them think 30 years down the track, some information and guidance is better than none.

“There will be specialised advisers, it’s not an easy calculation and judging what’s right for a client is not straightforward. I can understand why some advisers won’t want to get involved, but I would have thought there will be some supply.”



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Given the media furore this week concerning the pension freedoms and fees, I shudder to think how the intricacies, risks and costs involved in capitalising an annuity will be covered in the mainstream media.

  2. Christine Brightwell 19th June 2015 at 10:47 am

    Just a small point here, as far as I am aware Pension Wise does not give tailored guidance on the tax consequences of any particular option – they cannot as the individuals seeking guidance are too varied in circumstances. So, anyone seeking guidance from Pension Wise would struggle to use that guidance to look 1 year ahead, let alone 30. When individuals ask Pension Wise how the generic guidance affects them personally they are told to seek professional advice. Which costs money.

    Pension Wise guidance on selling annuities – HOW?????????

  3. Wr Webb what about raising the LTA which will now impact doctors, teachers, hard working/saving individuals through no fault of their own thanks to you

  4. Surely older retirees need *less* protection, since they have less to lose if they cash in their annuity and it’s a bad deal. If anyone needs protection it’s the younger retirees, as if they make a bad decision, it will affect their lives for 30 years or more.

    Can’t stand all this “old people struggle to understand…” terminology. Not all over-80s are confused and doddery.

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