Consultation on annuity guidance

Last Modified: 02 Dec 2008
Source: PA News

A pensions body has launched a consultation on how to help people on low and middle incomes convert their pension pot into a retirement income.

The Personal Accounts Delivery Authority (PADA) is looking at ways to help people with the accounts choose and buy an annuity when they retire, as well as exploring the possibility of enabling those with small pension pots to take the money as a lump sum.

Personal Accounts will be introduced in 2012 as part of the Government's scheme to have workers automatically enrolled into workplace pensions.

People who do not have access to a good company scheme will automatically be enrolled into one of the accounts, into which they will pay 4% of their earnings, with their employer contributing 3% and the Government 1%.

But while the scheme will help people to save towards their retirement, it will not provide annuities for members.

Instead it plans to make sure members have clear information about the choices they have and where they can purchase an annuity.

The PADA will flag up the open market option, under which people can buy an annuity from any provider, as well as giving members access to a panel of providers who agree to meet certain conditions set by the scheme.

Tim Jones, chief executive of the PADA, said: "We expect that many Personal Account members will have a limited understanding of financial products, and in particular, how to buy an annuity.

"We want to come up with the best possible solution for members of personal accounts, so that they get a good retirement income."

The PADA hopes to publish the results of the consultation by June 4.

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