Demand for simpler annuity rules

Demand for simpler annuity rules

Any more regulation will "strangle" new flexibility, says Ronnie Sloan, Punter Southall, commenting on the Department of Social Security’s (DSS) consultation paper on annuities. The Government hopes to relax rules for money purchase schemes and let them take advantage of investment linked and with profits annuities. Email: enquiry@puntersouthall.com, www.puntersouthall.com

This follows reports that the demand for new style annuities is rising, leading to retirees becoming increasingly "risk happy". The Annuity Bureau has produced research indicating that investment linked and with profit annuities are likely to make up 20% of the total annuity sector this year. This represents £1.5bn against a total market value of £7.5bn. Peter Quinton of the Annuity Bureau says: "The influx of the new style, investment linked products... has increased investment opportunity for those retirees who were previously caught between purchasing a safe standard annuity or leaving the annuity market altogether to buy a riskier drawdown investment".

The Wentworth Rose Annuity Service has seen evidence of this purchasing growth for with profit annuities. More than 50% of its sales is from with profit buying. The main advantage of with profit annuities, according to Wentworth Rose, is that they offer opportunity for income growth while benefiting from the smoothing effect of a with profit fund. Philip Rose, managing director, says: "For those with funds too small to use income drawdown, with profits annuities give a low risk method of securing a growing income and linking the annuity to stock market based investment". Tel: 01276 26111 or email: mail@wentworthrose.co.uk

Finally, there is some good news for smokers wishing to give up. The Annuity Bureau has revealed that smokers on the brink of retirement could qualify for an increased pension income from a special rate annuity. Unlike conventional life assurance, this can pay up to 5% more than a standard annuity for a non smoker. On a fund of £100,000, this could mean an extra yearly retirement income of £470 above the top standard annuity rate. For further information, contact the Annuity Bureau on www.annuity-bureau.co.uk. A free guide is available by calling 020 7620 4090.

Further details are on the DSS website: www.dss.gov.uk

This issue went to press after Budget Day.