The government’s Budget changes to pension annuity rates age 75 rule could lead to pensioners being worse off, retirement experts have warned recently. Bob Bullivant, chief executive of Annuity Direct, and Andrew Megson, head of retirement for Partnership, hit out at the proposals that give people the option to defer having to buy an annuity at 75 and instead take out an unsecured pension, which allows an income to be taken from a pension fund while the remainder of the fund remains invested.
Mr Bullivant, who helped launch the Fair Unsecured Pensions campaign to urge financial advisers to put pressure upon the FSA and product providers to create a better and fair analysis of critical yields, warned that many retirees could be worse off under the new regime unless the risk they are taking is quantified and explained accurately. He said that retirees who choose an unsecured pension are essentially extending the risk element of their investment well into their retirement. The positive side of this is greater flexibility it has to be said, but people need to be aware of the dangers that are involved. This view was echoed by Andrew Megson, who added that the government should encourage retirees to shop around for the best pension annuity rates by making it a mandatory part of the approaching retirement process.
Mr. Megson said that until now, we have seen two clear spikes of annuity rates purchase at age 60 and age 65. All other annuity transactions are spread out evenly between the ages of 55 and 75. The number of people who annuitise over the age of 70 is actually the smallest percentage of all annuity transactions, so scrapping the age 75 rule will only deliver benefits to a relatively small number of retirees. There is no way the cost of this change can deliver more than a limited benefit to a limited number of people, he concluded.
