ANNUITIES/PURCHASED LIFE ANNUITY
Synopsis: Iain Duncan Smith, the Work and Pensions Secretary, has introduced a new Schedule to the Pensions Bill 2013, which will enable regulations to be laid restricting the charges that can be made in respect of qualifying money purchase schemes.
Date posted: Thursday, October 31, 2013
Iain Duncan Smith, the Work and Pensions Secretary, has at the committee stage of the Pensions Bill 2013, introduced a new schedule that will enable regulations to be laid to restrict the charges that may be made in respect of qualifying money purchase schemes. This follows the recent OFT report on pension charges and will form part of the Government’s intention that charges under schemes used for automatic enrolment are not excessive.
Another interesting amendment to the Bill has been proposed by Greg McClymont, the Labour Shadow Minister for Work and Pensions, with regard to the provision of annuity benefits for members of qualifying money purchase schemes. This provides that:
‘(1) Any qualifying money purchase scheme must direct its savers to an independent annuity brokerage service or offer such a brokerage service itself.
(2) Pension schemes shall ensure that any brokerage service selected or provided meets best practice in terms of providing members with—
(a) an assisted path through the annuity process;
(b) ensuring access to most annuity providers; and
(c) minimising costs.
(3) The standards meeting best practice on decumulation shall be defined by the Pensions Regulator after public consultation.
(4) The standards set out in subsection (3) shall be reviewed every three years and, if required, updated.’
The importance of advice, in assisting individuals to obtain the best and most appropriate annuity, is being increasingly recognised. It will be interesting to see whether this amendment is passed or perhaps accepted with further changes.