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May 12, 2014 5:28 pm
Partnership has become the latest pension provider to launch a new annuity amid calls for the financial regulator to take a closer interest in products launched in the wake of George Osborne’s Budget reforms.
On Monday, Partnership unveiled its new “enhanced choice” annuity developed in direct response to the Budget reforms, which will allow savers to access their cash from April 2015.
The enhanced choice annuity allows savers with pension pots of £10,000 or more to lock in a guaranteed lifetime income, which like an annuity will pay a higher income for those in poorer health or who smoke. But Partnership’s enhanced choice product offers the option to surrender after the first year, or continue.
“This product is aimed at the 50 per cent of 65-year-olds with a health or lifestyle condition who may traditionally have bought an annuity but don’t wish to commit fully to purchase before the introduction of the new pension regime,” said Partnership, whose shares were badly hit by the Budget reforms, announced in March.
“This will give them access to their 25 per cent tax-free lump sum and a guaranteed income for life plus the ability to benefit if their health deteriorates, interest rates rise or they decide another option is more suitable. The consumer has complete choice and certainty.”
The enhanced choice annuity follows the launch of two new 12-month annuities in recent weeks, one by Just Retirement and the other by LV=. These aim to help savers access their pension cash but keep their options open, ahead of next year’s liberalisation of pension rules. Customers for these were automatically forced to exit after a year, and then pay commission, or an advisory fee, to buy another product.
“If interest rates go down, they can stay with Partnership with no reduction in income but, if rates increase, they can move,” said the company.
The flurry of new annuity launches comes as concerns grow that products emerging in the wake of the Budget reforms are poor value.
Ros Altmann, an independent pensions expert, has described some of the 12-month annuities deals as “awful”, with sales commissions as high as 2 per cent coming off the pension fund.
“We need fair products for unsuspecting customers,” said Ms Altmann.
“It’s not just the 2 per cent commission (for the first purchase), because they’ll need to pay more in a year again (when they buy another product). Freedom can work better than this.”
LV= said the fixed-term annuities were designed to give consumers some “breathing space” ahead of the pension reforms. “This product is designed to help retirees access their tax free cash and income now and defer making a long-term decision about their pension income until the new rules come into effect next year. In this way clients don’t limit their future options.
“We would always encourage people to seek independent financial advice in order to ensure they get the most out of their pension fund.”
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