According to a industry observer, there are a series of key reasons why the government should not raise the pension annuity age limit, currently being proposed by the Conservatives. David Prosser, who recently wrote an article in the Independent, says that people should opt for an annuity purchase to avoid having to be reliant on state benefits, especially if they spend a large proportion of their retirement fund in the early years.
Although he concedes that there are some inherent problems with annuities for some retirees, such as the rigidity they inflict with a fixed annuity rate, he argues that the calls for a scrapping of the age 75 limit have ulterior motives. He says that “...what they really want is to find a way to pass on unused pension savings to their heirs – ideally with the minimum deduction possible made for inheritance tax.” He alleges that the change in the rules would only impact on a small minority of retirees, those with very large pension funds who would be free to make large investments.
The danger, he argues, is that many people will think that an annuity is not a desirable option and will refrain from purchasing one. This could, in theory at least, lead to people spending all of their pension fund and then having to be more reliant on state benefits later on in retirement.
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