Tories
will scrap 'buy annuity' rule |
RULES forcing pension savers to
buy an annuity when they reach age 75 would be scrapped by a new Tory
government. |
|
In a keynote speech at think tank
Politeia this week, Conservative work and pensions spokesman David Willetts
pledged to axe the rules that make people with personal pensions and other
money purchase-type schemes use at least three-quarters of their pension
savings to buy annuities - insurance plans that pay lifetime incomes. |
|
He said: 'My party is committed
to removing the obligation to buy an annuity. The only condition is that people
have enough income to ensure they don't end up on means tested benefits.'
Annuities have come under fire in recent years for offering poor value. |
|
They have been hit hard by a
combination of low interest rates and the fact that people are living longer
than previously expected. As a result annuities have to pay an income for far
longer than initially expected. |
|
Legal & General last week
set aside an extra Pounds 100 million after acknowledging that many of its
existing annuity customers will live longer than was expected when they
originally bought them. Existing customers' income will not be affected. |
|
Mr Willetts, the MP for Havant,
Hampshire, also argues that insurance companies will offer better deals if
pension savers are no longer forced to hand over their pension savings to them.
He said: 'It is not for the state to tell people to buy annuities. And if
you're obliged to buy an annuity, you might suspect this reduces the pressure
on the providers to make them a good deal.' He says annuities are also
unattractive to many savers because the money is swallowed up by insurers, so
nothing is left to pass on to the next generation. |
From April 2006, pension savers
will be able to buy annuities that pay back any unused money if they die before
their initial savings are used up, but they'll get a lower income if they
choose this option.
|
|
|
Tories
will scrap 'buy annuity' rule |
|
|
|
RULES forcing pension savers to
buy an annuity when they reach age 75 would be scrapped by a new Tory
government. |
|
In a keynote speech at think
tank Politeia this week, Conservative work and pensions spokesman David
Willetts pledged to axe the rules that make people with personal pensions and
other money purchase-type schemes use at least three-quarters of their pension
savings to buy annuities - insurance plans that pay lifetime incomes. |
|
He said: 'My party is committed
to removing the obligation to buy an annuity. The only condition is that people
have enough income to ensure they don't end up on means tested benefits.'
Annuities have come under fire in recent years for offering poor value. |
|
They have been hit hard by a
combination of low interest rates and the fact that people are living
longer than previously expected. As a result annuities have to pay an income
for far longer than initially expected. |
|
Legal & General last week
set aside an extra Pounds 100 million after acknowledging that many of its
existing annuity customers will live longer than was expected when they
originally bought them. Existing customers' income will not be affected. |
|
Mr Willetts, the MP for Havant,
Hampshire, also argues that insurance companies will offer better deals if
pension savers are no longer forced to hand over their pension savings to them.
He said: 'It is not for the state to tell people to buy annuities. And if
you're obliged to buy an annuity, you might suspect this reduces the pressure
on the providers to make them a good deal.' He says annuities are also
unattractive to many savers because the money is swallowed up by insurers, so
nothing is left to pass on to the next generation. |
|
From
April 2006, pension savers will be able to buy annuities that pay back any
unused money if they die before their initial savings are used up, but they'll
get a lower income if they choose this option.
DEADLINE LOOMS FOR FINANCIAL IT |
|
Some 20,000 UK mortgage and
insurance providers have less than four months to ensure their IT systems are
in order before becoming regulated by the Financial Services Authority (FSA). |
|
From the end of October, the
provision of mortgages will become an FSA-regulated industry, with insurance
following in January 2005. |
|
Regulated companies are
required to keep records of customers and transactions and provide regular
electronic reports to the FSA on their activities via the watchdog's integrated
reporting system. |
|
'Firms will have to provide
details of things like financial information, customer complaints and the
volume of business conducted,' said an FSA spokesman. |
|
But analysts say that many
firms are fire-fighting in preparation for the change, rather than trying to
develop a wide-ranging systems approach to help deal with a range of
legislation. |
|
'Firms haven't had a chance to
sit back and see that there's a lot of commonality between what various
regulations are looking for,' said Sian Jones, managing analyst for financial
services technology at Datamonitor. |
|
'Most of the regulations are
very similar at a high level, in terms of standardisation, transparency and
visibility of processes. |
|
'What puts people off from
doing this in the past is the cost and the desire to get something out to
market reasonably quickly to show themselves to be compliant. What's needed is
a slightly longer-term approach, because you get significant business benefit
from having efficient processes in place,' she said. |
|
A spokeswoman for the Council
of Mortgage Lenders says the distribution of mortgage products is reliant on
IT. |
'Mortgage lenders and brokers
will have to provide a key fact illustration of each mortgage deal, which has
to be given to customers before they commit to the loan application. That is a
huge development issue,' she said.
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