30 June 2010
Retirement specialist Partnership argues Budget plans to scrap “Age 75 Rule” will only benefit tiny minority
- Government putting cart before the horse and ignoring the real problem – far too few people aware of the Open Market Option
- Impact on pensioners in qualifying bracket ‘absolutely minimal’
- Partnership urges government to put pressure on life giants to make OMO obvious
PLANS TO scrap the age 75 annuity rule from next April as revealed in the emergency Budget will benefit an extremely limited percentage of pensioners – and prove disproportionately expensive to implement - reckons annuity provider and retirement specialist Partnership.
Previous rules stated that people with a defined contribution pension had to buy an annuity at the age of 75, giving them a guaranteed income for life, but the Government has now proposed that this rule be scrapped by April 2011.
A transitional arrangement has been put in place which for the next two years will increase the age at which people have to buy their annuity to 77.
Andrew Megson, Managing Director, Retirement at annuities specialist Partnership, said: “Until now, we have seen two clear spikes of annuity purchase at age 60 and 65. All other annuity transactions are spread out between the ages of 55 and 75.”
“The number of people who annuitise over the age of 70 is the smallest percentage of all annuity transactions, so scrapping the “Age 75 Rule” will only deliver benefits to an extremely limited number of consumers.
“There is no way this change can deliver more than a limited benefit.
“In our view, the Government should be putting its limited resources into making sure consumers are aware of the Open Market Option to shop around for the best annuity by making it a mandatory part of the retirement process,” Megson continued.
Partnership recently revealed that the majority of the UK’s over-50s population is headed for an impoverished retirement, with the vast majority, 77% of all annuity transactions over the past six years being for funds under £30,000 (Source: ABI data Q3 2009. See Graph 1, below).
“Based on the number of funds below £30,000 purchasing an annuity over the last few years, there are clearly a significant number of people who need the certainty of guaranteed income and who cannot afford to delay annuitisation,” said Megson.
“Scrapping the “Age 75 rule” won’t help the majority of people who have smaller pension funds – and this in our view is where reform is needed most,” Megson added.
“There would be a much greater benefit to increasing provision for those approaching retirement as to their options when purchasing an annuity.”
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Press Enquiries:
Philip Brown
Head of Retirement Products
0207 618 2816 / 07500 104 604
Partnership philip.brown@partnership.co.uk
Jim Boyd
Director of Corporate Affairs
0797 345 8675 / 0845 108 7240
Partnership jim.boyd@partnership.co.uk
Rebecca Dwyer
Consultant
01273 777144
David Andrews Media Ltd rebecca@davidandrewsmedia.co.uk
David Andrews
Senior Consultant - Director 07941 255855 / 01273 777144
David Andrews Media Ltd david@davidandrewsmedia.co.uk
About Partnership:
Partnership is a specialist provider of financial solutions for people with health/ lifestyle conditions, as well as those suffering from a serious medical impairment. They are experts in the field of medical underwriting, one of the key thought leaders in the retirement market, and offer a firm commitment to supporting advisers in growing their business.
Partnership offers a complete range of Enhanced Annuity solutions, from clients who smoke or have minor health impairments, through to serious conditions such as Cancer. They are the market leaders in the provision of annuities for Long Term Care funding, and also offer specialist Protection solutions for clients who have been declined cover from standard providers.
Partnership was winner of the 'Long-term Care Provider' award at Health Insurance Awards 2009 and this year’s Simply Biz ‘Annuity Provider of the Year’ award.
For more information please visit www.partnership.co.uk