November 2007

Review retirement provision

Dear Editor,

The 2007 Pre-Budget report seems to show inconsistencies in HM Treasury's approach to the decumulation stage of pension planning. Winterthur welcomes the Treasury's review of the open market option. For many people the purchase of an annuity is the right way to secure their retirement income and therefore choosing the best annuity rate and the most suitable structure is vital.

The idea of a tool from the TPAS and a review of literature and the provision of further information must be good, but the proof of the pudding will be in the eating. The "Annuity Market" paper issued with the 2006 pre Budget report showed that only 32% of people used the OMO.

Traditional annuities are not liked by everyone and as people live longer and circumstances change, flexibility will be the key.

So we were disappointed to see the other changes

- The decision not to change the tax rules to allow further development of hybrid decumulation products shows a lack of vision. There has been much talk of variable annuities and yet innovation has been suffocated before even starting. Such innovation was again referred to in the Annuity Market paper and so no progress has been made.

- Similarly the bringing of scheme pensions into the unauthorised payments regime while expected is disappointing.

Retirement planning and retirement options are a key part of an individual's financial planning and should adapt to the times. So from the Modernising Annuities consultation paper in 2002 through to the Annuity Market consultation last year very little has in fact changed.

Winterthur would like to see a full review of the whole retirement area to consider the future of annuities, innovation in the market and a revision to the inheritability of pensions.

Mike Morrison
Pension Strategy Manager
Winterthur Life