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.”