Measures put in place to increase retirement income
Moves have been made to boost retirement income according to last week’s Pre-Budget Report. Under the ‘open market option’, retirees who wish to use their pension savings to buy an annuity, which pays an income for the rest of their life, should be able to look around for the best offer.
Savers should be able to apply the open market option, whether they are in a personal or a company plan but even though company schemes are meant to offer this facility, some don’t.
Under the new of measures the Financial Services Authority (FSA), the city regulator is to keep a careful watch on alleged poor-performing providers in relation to delays in transferring open market option funds and assess this against its Treating Customers Fairly (TCF) principle.
Furthermore, the Association of British Insurers (ABI), the trade body, is to restore its existing Statement of Good Practice on Pension Maturities. The Revenue will also clarify with the industry that tax legislation allows pension schemes to offer an annuity under an open market option without having to provide a pension themselves.
This is to help eradicate any misunderstanding that might prompt some pension providers who are reluctant to accept annuity business to offer uncompetitive rates.
Retirees could enhance their income by 10%, or in some cases up to 30%, by shopping around for the best annuity rate. The Department for Work & Pensions has teamed up with the Treasury to improve the way the annuity market works for those in personal as well as company pensions.
Furthermore, The Pensions Advisory Service is to set up a web-based tool to help guide people through their retirement income options, including choosing the best annuity for them such as a single or joint life annuity.