Pension annuity shake up needed in Pre-Budget Report Go compare with our comparison table

Pension annuity shake up needed in Pre-Budget Report

07 December 2009 / by Rebecca Sargent

Pension annuities should be addressed in the Pre-Budget Report, Age Concern and Help the Aged have claimed.

Alistair Darling is due to announce his Pre-Budget Report on Wednesday, and the charities are calling for changes to tax rules and a shake up of the annuities market to help give pensioners a better deal.

According to Help the Aged and Age Concern, people with small pension pots often get a poor deal from annuities as a result of complex regulations and unfair tax rules which mean they can face heavy tax penalties when they cash them in.

As a result they are calling for these tax rules to change, in addition to a shake up of the pension annuities market, which currently sees 10 firms corner nearly 90 per cent of the sector.

As a result, Age Concern and Help the Aged are calling on Alistair Darling to increase competition in the annuity market by introducing an online brokerage system, requiring all annuity providers to publish benchmark annuity rates, and developing a kitemark scheme to ensure that minimum standards are met.

Commenting, 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 Pre-Budget Report provides an opportunity for ministers to signal a shake up of the system and ensure it is fit for purpose when auto-enrolment is introduced by 2012."

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£6,950
Monthly income for life
£100,000
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£6,521
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£6,154
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£100,000
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Quotes based on man aged 65, £100,000.00 purchase amount, conventional, level escalation, nil guaranteed period, paid monthly in arrears without proportion. Annuity rates correct as at 22/06/2011.