New regulation 'could cut annuity payouts'
01 August 2012
The introduction of new regulations that will affect the annuities market in the UK could have the impact of seeing rates paid on the products dropping further.
A timescale to force through the new rules in the next few weeks has been criticised by the National Association of Pension Funds, which stated it is "astonishing" the industry has been given such a short period of time to assess the impact of the amendments.
According to a report by the Daily Express, Darren Philp at the body stated there are a wide range of complex and technical issues to look at as a result of the introduction of new rules.
Former government advisor on pensions Dr Ros Altmann stated annuity rates are likely to fall following the change to regulation imposed by Europe, adding: "Insurers will have to hold more gilts, which means that the interest rates on their assets will fall again, which means they will pay out even lower annuity income for each pension fund."
She explained annuity providers are going to be forced to cut the amount of pension they pay out to new retirees as a result of the changes.
Pensions minister Steve Webb has pledged to fight the introduction of the regulations and stated there will be no compromise by the coalition government on this issue.
He argued that the introduction of the rule changes is going to lead to hundreds of billions of pounds being lost by people in the UK, as well as scheme closures.
A report by Citywire recently highlighted the importance of shopping around for an annuity before making a final decision on the financial product, due to the fact this can make a major difference to the retirement income of an individual for the rest of their life.
People wishing to learn more about annuities and their options can do so at Key Retirement Solutions, which has a dedicated service for this part of the market.