MP Questions Government on Pension Changes

During yesterday’s Budget Debate in the Commons, Dame Anne raised questions over the Government’s pension changes and called for a rebrand of annuities.

Dame Anne said:

“Annuities need reform, I’ve called for annuity reform, my Select Committee has called for annuity reform and the Shadow Front bench has. Indeed the Government and the Pensions Industry has called for reform.

“As Government Members have emphasised again and again today, we need consumer choice so that people can make the right decision about how they will spend their own money. For some people paying off another debt might be the most sensible thing to do. However, the best thing for many people to do is to buy an annuity.

“Annuities are an excellent principle — someone saves into a pot and then buys something that lasts them to the end of their life. We do not know how long we will live after reaching pension age, so an annuity provides insurance: we know it will not run out before we reach the end of our life. It insures against old age.

“All of that is right. However — this is the big but — what if there is no annuity market? What will the many people for whom an annuity is the right choice do then? That is the question that I have for the Government. Did they intend to undermine and destroy the annuity market, or did they hope that a new form of annuity would rise phoenix-like out of the flames of their announcements last week? If the annuity market were to collapse, the choice that they say they want to give consumers will not be there for those for whom an annuity is absolutely the right choice.

“Do the Government anticipate that the annuity market will be undermined or strengthened?”

Dame Anne went on to call for an Annuity rebrand:

“Annuities have got a bad name because there have been low interest rates and low returns, but other products have the same problem. Some of them might actually give a worse return than annuities. What guarantee can the Government give that people who buy another product will not get a worse return than if they had chosen an annuity? We know that high charges and costs need to be dealt with.

“I wonder whether the Government thought about just rebranding annuities because they have such a bad name. Perhaps they could have called an annuity a pension for life, which might have changed people’s attitude. I wonder whether the Government intend to turn the UK private pension system into a saving system, and if they do, will tax reliefs remain?

Was that the Government’s intention, or is it an accidental consequence of last week’s proposals?”

You can read the full Budget debate, including Anne’s contribution here: http://www.publications.parliament.uk/pa/cm201314/cmhansrd/cm140325/debtext/140325-0003.htm#14032588003560

Advertisements