ANNUITIES/PURCHASED LIFE ANNUITY
Synopsis: In an article in the February 8 edition of the Daily Telegraph, Rachel Reeves, the shadow Work and Pensions Secretary, has indicated that a future Labour government will require all retiring members of a money purchase pension scheme to be referred to an independent broker, to ensure they obtain the most appropriate pension provision. A future Labour government would also introduce a cap on pension scheme charges.
Date posted: Monday, February 10, 2014
In an article in the February 8 edition of the Daily Telegraph, Rachel Reeves, the shadow Work and Pensions Secretary, has indicated that a future Labour government will require all retiring members of a money purchase pension scheme to be referred to an independent broker, to ensure they obtain the most appropriate pension provision. Labour is concerned about the number of money purchase pension scheme retirees, who set up an annuity with their pension provider without seeking advice or taking advantage of the open market option. It highlights that savers are missing out on £1 billion in pension income each year as a consequence. Ms Riley writes ‘A Labour government would introduce a requirement for all savers to be referred to an independent broker to make sure that they get the best deal when they turn their pension savings into retirement income. With the help of an independent broker, the average saver could be £400 a year better off.’
Labour is also very concerned by the Government’s recently announced delay of the introduction of a cap on pension charges. MS Riley writes ‘Labour will also crack down on the rip off fees and charges, which the Government’s own figures show could be costing savers £230,000 from their lifetime savings. Yet after promising a ‘full frontal assault’ on charges, the Government has kicked the issue into the long grass. A Labour government would introduce a fair cap of at least 0.75 per cent to end excessive fees and charges, enabling people to keep more of their savings.’
This article forms part of Labour’s pre-election campaign, addressing key areas of popular concern including energy prices and the banks. While there is no doubt that more must be done to improve the retirement outcomes for money purchase scheme retirees, with the average money purchase pension pot used to purchase an annuity being just over £30,000, it is difficult to see from where the cost of providing the independent advice will be met.
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