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Ending compulsory annuity doesn't solve the pension crisis

Ending compulsory annuity doesn't solve the pension crisis

13 December 2010 / by Rachel Mason

George Ladds, head of pensions at Fair Investment Company says the Government's announcement that following its consultation on annuities, the requirement to annuitise by age 75 will be scrapped from April 2011 is not enough, and urges the Government to get down to the "nitty gritty".

"I support ending the effective requirement to purchase an annuity by 75, because it gives people much more choice and flexibility, allowing them to choose how and when they want to use their pension fund. However, due to the fact the legislation has set a Minimum Income Requirement (MIR) of £20,000, the vast majority will still be buying an annuity.

"Although I think more flexibility is positive, it is still not getting down to the nitty gritty, the real issues surrounding pensions and pension savings in this country. The real problem lies with the fact that people are not saving enough for their retirement. And if you haven't saved enough, whether or not you have to buy an annuity at age 75 is not going to be your most pressing concern.

"What I would like to see are some radical reforms to the pension system that will help encourage people to save for their retirement. The Government is launching its auto enrolment scheme (NEST) but I don't think this is the right way to approach the problem.

"I would urge the Government to make much bigger changes and blend ISAs with pensions and state pensions. This would make pensions much more relevant to young people and give them the encouragement they need to save for the future."