ABI urges pension annuities shake-up

THE Association of British Insurers (ABI) will call on the government for a major shake-up in the regime governing pension annuities, when the committee stage of the Pensions Bill begins in the House of Lords tomorrow.

It is pressing peers to lift from 75 to 80 the age at which investors must cash in their pensions savings in return for the regular income provided by an annuity. Many savers resent being forced to buy an annuity, and would rather continue managing their nest-egg in a live fund.

ABI associate director of retirement policy Helen McCarthy said: "The existing annuity regime is extremely restrictive. Making pensions options more flexible will encourage investors to put more away for their pension, confident they can get good value later in life."

The industry body is also calling for restrictions on guaranteed annuities to be lifted. Many savers are unhappy that they can invest their life's savings in an annuity one day and die the next, leaving the insurance company to pocket their lifetime's earnings.

McCarthy said: "It is possible to buy a guaranteed annuity, so that if you die early your money goes to your family, however, only up to the age of 75. These contracts are very popular, so we believe that threshold should be lifted. It would give many savers greater confidence."

Similarly the ABI will ask the Lords to include an option for "variable" annuities, whereby investors can draw-down different levels of income at different stages of their retirement.

McCarthy said: "We are supposed to be working towards a world of flexible retirement, which means that different people will need different amounts of money at various stage of their later years. This is currently very difficult to organise as the rules stand. If we want people to phase retirement, we have to be free to design products which can help them do just that."