PBR annuity changes needed, charity claims

07/12/2009

The current system of pensioners' retirement income should be reformed by this week's Pre-Budget Report (PBR), a major charity has said.

Age Concern and Help the Aged, which merged into a single organisation this year, said that the annuities market needs a "radical shake up" to help people with "small" pension pots fund a better retirement.

All retirees with private pension savings can transfer their funds into an annual income by purchasing an annuity.

However, annuity rates have fallen significantly over recent months, meaning that more and more pensioners are facing lower incomes.

This can have knock-on effects on the group's ability to service their debts and even to pay for essential costs such as gas and electricity.

Age Concern and Help the Aged said that pensioners can face a "heavy tax penalty" when taking out an annuity and called for these rules to be changed.

Market competition was also flagged up as a concern, with the biggest ten firms controlling around 90 per cent of the annuities market.

Andrew Harrop, head of public policy at Age Concern and Help the Aged, said: "Despite the impact of the recession, the right annuity continues to offer a secure way of turning retirement savings into a stable source of income.

"But the tax system penalises those with small pension pots and the annuities market is hamstrung by legislative complexity and dominated by a few major players. This adds up to a poor deal for people with small pension pots."

The PBR is delivered in parliament on Wednesday (December 9th).

Tags; Budgeting Advice, Retirement Money Problems,

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