Annuity reform hits the rocks
A long time ago on 12 December last year, back in the very early days of the BeeHive, I wrote a BeeLine on the attempt by Edward Garnier MP to reform annuities and I said I would let you know how it all turned out. If you remember, the Conservative MP had tabled a Private Member’s Bill calling for an end to the rule that forces people with pension savings to buy an annuity by the age of 75.
Well, that was news just a week before the Government published its long-awaited pensions Green Paper on 17 December last year and since then, well, you know the rest. The annuity issue hasn’t gone away in the meantime, but many other pensions issues have dominated the national and industry press coverage practically non-stop ever since.
The Garnier Bill finally bit the dust the other week, just before this session of Parliament wound up for the Summer hols. It received much support from MPs from all parties, but it simply ran out of time in the Parliamentary process, in effect having “time out” called against it. I am not sure this was a particularly surprising result, and it isn’t the first time a Bill to reform annuities has failed to navigate the considerably tricky Parliamentary process; Garnier’s Bill was the third attempt at annuity reform in the last three years. So these attempts are becoming almost an annual event in the pensions calendar.
I shouldn’t think it will be the last such attempt either, there are good reasons why our approach to annuitisation needs to be modified in my opinion. The Garnier Bill argued that people should only be required by the State to annuitise up to a level sufficient to raise themselves above the Minimum Income Guarantee, whereas, at the moment, we are required to spend 75% of our pension savings on an annuity. This is similar to the line Scottish Life, and the wider Royal London Group of which it is part, took in our own lobbying on the issue of annuities, and I have included links below to the four papers we produced on this topic a while ago. These continue to represent the views we still hold and echo much of what Dr Oonagh McDonald’s Retirement Income Reform Campaign has been consistently saying too.
It seems to me that we will eventually reach the stage where the ‘nanny state’ idea of assuming all people have the same needs during the period of their lives we call ‘retirement’ will seem an outmoded notion. To many of us it already is. The important changes that will be wrought after 2006 when the UK is required to comply with the anti-ageist approach to legislation from the European Union must surely also affect this age-related imposition to annuitise our savings. Indeed, seeing this latest attempt at reform fail prompted me to read again our lobbying papers from a few years ago. I am sure we were right to call for reform then. The papers are exactly as they would have been were I writing them afresh today. I’m sure we’ll get there eventually.
24 July 2003
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