Vip News : Retirement: No simple solutions here

Retirement period is definitely in the limelight these days as the government ponders over the question of senior citizens who are into buying annuities. The government says that this process will become much more simple in the near future. The industry, however, begs to differ.

6 April 2006 is an important date, as it will herald in the 'pensions simplification' scheme. The Inland Revenue has taken measures whereby, pensioners will be able to switch annuities between providers and also have control over the amounts they want to receive. What this will do is that a person has a choice to switch to a different insurer if he feels that he is not getting enough from his present one. However, there are those who feel this will not be so. Peter Quinton of the Annuity Bureau, says, 'It's not going to be as easy as it might seem. Until we have got clearer guidance we won't know.' He feels that this system could not be implementable in case there is a pre-agreed amount that you were to receive.

Donna Bradshaw of independent financial adviser IFG says, 'It could be that the only time you would get a reasonable transfer might be with a company that really does not want annuity business.'

This could end up as being an additional headache to the conventional annuitants who would end up paying more for the advice than receive the financial benefit that is intended from switching over. The Pensions Commission report that will be tabled in October will want a greater flexibility in this regard, Quinton says.

Chris Lynas of accountant Smith and Williamson feels that the life expectancy is such that a recipient would have to expect a further 20 years of life in order to get maximum benefit from this move. Lynas says: 'No one can predict what is going to happen over the short term.'

So these people at the very heart of the annuity operation are advising caution when choosing a switchover.

Posted on : Sat, 16 Apr 2005 00:00 GMT | Pensions News
By : Pippa Fielding