• Text size      
  • Send this article to a friend
  • Print this article

Altmann: annuity values will not be worse under plan

PENSIONS campaigner Ros Altmann has insisted ­that annuity rates are unlikely to get any worse, as she defended the Government's plans to make it easier for savers to cash in retirement funds.

But Liberal Democrat MP John Thurso warned the changes risked creating a "regulatory nightmare".

There have been predictions that the proposals outlined in the Budget earlier this month will lead to a massive shrinkage of the annuities market, leading to poorer pay-outs for those who still want them. Leading provider Legal & General has estimated demand could drop by three quarters.

But Dr Altmann said: "Certainly the average annuity represents such poor value, it is difficult to imagine the value worsening."

She told Parliament's Treasury committee buying an annuity is akin to buying fire insurance for a home but leaving oneself vulnerable to flooding or theft because they typically do not protect against inflation or provide money for a partner.

"The annuity market has been regulated as if annuities are a no-risk product suitable for everybody," she said.

She argued the product may be best for people in late retirement.

While the Government has promised those 400,000 people reaching retirement every year free face-to-face guidance on their income options, Ms Altmann said this might require incentivising employers to provide financial planning assistance.

Officials from the ­Financial Conduct Authority admitted to the committee the Treasury had not shared with the regulator its modeling on the impact of its changes to annuities.

But Chris Woolward, director of policy, risk and research, insisted the reform would not necessarily lead to poorer deals for those who still want to buy annuities.

"In general, when you have more competition you tend to get better results for consumers," he said.

John Thurso, the MP for Caithness, Sutherland and Easter Ross, questioned whether consumers are capable of assessing their likely longevity and warned the changes risk creating a "potential regulatory nightmare" with consumers left "bemused" by the new rules.

David Geale, head of savings, investments and distribution said: "There are suggestions people somewhat underestimate (their life expectancy)."

Contextual targeting label: 
Local government

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

223585