Charities want best pension annuity rates for all in UK. A couple of key players are calling for an annuity shake-up. Both Age Concern and Help the Aged are looking for a radical shake-up of the annuities market to help those with smaller pension funds get a better deal. These charities are concerned that retirees with modest pension pots are being penalised unfairly when they come to purchase their annuities because of the harsh taxation applied. They want changes to tax rules so retirees with savings which are too small to be turned into a pension annuity can be drawn as cash, without penalties. They also want those with smmaler funds to have access to advice to help them get the best annuity rates.
All this is part of a paper published in advance of the forthcoming pre-budget report which examines the effects the recession has had on pension annuities and highlights the challenges faced by those with smaller funds to draw down. The forthcoming ’Coping with the crunch – the annuity challenge’ report is suggesting that the government to put schemes in place somehow to increase competition in the retirement market and help people make a better choice, helping some get the best UK annuity rates.
Andrew Harrop, head of public policy at both Age Concern and Help the Aged, said that despite the impact of the recession, the right pension annuity continues to offer a secure way of turning a pension fund into a stable source of income. However, the tax system penalises those with small pension funds and the annuities market is hamstrung by legislative complexity and mainly dominated by few players. This adds up to a poor deal for retirees with small pension pots, he added. According to the charities, there are currently 10 companies which dominate the annuities market. And two thirds of pension providers only offer their annuities to existing customers. The charities want all annuity providers to publish benchmark UK annuity rates and for the development of a kitemark system to ensure these firms meet minimum standards. Mr Harrop added that this pre-budget report provides an opportunity for ministers to carry out a shake-up of the system and ensure it is fit for purpose when personal pension auto-enrolment is introduced by 2012.
