§ 25. Mr. Liddell-GraingerTo ask the Chancellor of the Exchequer if he will make a statement on his policy on annuities. [68426]
§ Ruth KellyThe consultation document, Modernising Annuities, published jointly with the Department for Work and Pensions in February, provoked considerable interest and strong feedback. I am today placing in the Library a summary of the responses.
The feedback confirmed that individuals need to be better informed about their annuity purchase. It is clear that many people could improve their retirement income if, at retirement, they were able to select the right annuity for their personal circumstances. It would be in their best interest to look for the best rate in the marketplace, which is not necessarily from the same financial institution that helped them save for retirement. The Government are working with the Financial Services Authority (FSA) and providers to ensure that people are able to make the right choices at the right time. One specific idea under consideration is encouraging the provision of information and advice through the work place.
As the consultation document explains, there is no case for abandoning the requirement that people should buy a lifetime annuity by age 75. This rule ensures that they can take advantage of insurance pooling to make efficient use of their pension savings.
Without prejudicing this rule and consistent with the principles outlined in the consultation document, the Government plan to bring forward powers to make it possible to offer people buying annuities more choice and flexibility. The aim will be to empower people approaching retirement to make the right choices for their circumstances by encouraging competition and transparency in the market for annuities. It will be important that this liberalisation dovetails with simplification and other reforms being considered in the pensions Green Paper this autumn.