The charity Age Concern has urged the Chancellor to overhaul the pension annuity system, so as to be more favourable to those with small pension pots. They, along with Help the Aged, have warned of “unacceptably higher” taxation charges that are being incurred by those converting their retirement savings into retirement income, such as an annuity. They also illustrated an alleged lack of competition in the pension annuity market, with the top ten providers dominating the market, providing 90% of UK pension annuities.
The other options for those with a small retirement income is to opt for equity release plans. But this means that retirees are reducing the amount they can bequeath to their loved ones. Andrew Harrop, head of public policy at Age Concern, said that although rates for annuities had fallen in the recession, they were still the best way to secure a stable retirement income.
He added that the pension annuity market was plagued by “legislative complexity” for those with small pension pots.
