Retirement
Labour pushes to help millions get better retirement incomes
Millions of pension scheme members could get help finding the best income when they reach retirement under Labour proposals.
The party has tabled an amendment to the Pensions Bill ahead of its third reading in the House of Commons tomorrow, proposing that all auto-enrolment scheme members be legally obliged to use an annuity broker at retirement.
Shadow pensions minister Gregg McClymont (pictured) wants to see all pension savers referred to an independent annuity brokerage service by their scheme, or alternatively for schemes to offer a service itself.
At present more than half of all annuity sales come from a pension investor buying an annuity directly from an insurance company.
Hargreaves Lansdown head of pensions research Tom McPhail said this means consumers are very unlikely to get the best deal around because there is no competition to force the insurer to offer a good deal.
The firm’s analysis of Association of British Insurers’ annuity data revealed about a third of insurance companies offer rates which are at least 10% below the best rate.
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The difference between the best and worst annuity for a healthy investor is around 25% and for someone in poor health could be as much as 60%. For even a relatively modest pension pot of £27,000, this equates to around £7,000 extra income for a typical retirement
He explained Labour’s amendment would ensure that all auto-enrolment scheme members enjoy the benefit of a shopping around broking service to help them find the best deal.
“Not only do retirement brokers help investors to work out how to draw on their retirement savings, they perform a vital role in helping them boost their retirement income by thousands of pounds. An increase of 30% to someone’s retirement income is fairly typical and they benefit from that increase for the rest of their lives,” said McPhail.
Other amendments to the Bill are also expected this week. These include powers for the government to cap charges; extending transitional arrangements for women within 15 years of state pension age in 2016; strengthening the governance of workplace pensions; and removing short service refunds on occupational schemes.