PENSIONS campaigner Ros Altmann has insisted that annuity rates are unlikely to get any worse, as she defended the Government's plans to make it easier for savers to cash in retirement funds.
But Liberal Democrat MP John Thurso warned the changes risked creating a "regulatory nightmare".
There have been predictions that the proposals outlined in the Budget earlier this month will lead to a massive shrinkage of the annuities market, leading to poorer pay-outs for those who still want them. Leading provider Legal & General has estimated demand could drop by three quarters.
But Dr Altmann said: "Certainly the average annuity represents such poor value, it is difficult to imagine the value worsening."
She told Parliament's Treasury committee buying an annuity is akin to buying fire insurance for a home but leaving oneself vulnerable to flooding or theft because they typically do not protect against inflation or provide money for a partner.
"The annuity market has been regulated as if annuities are a no-risk product suitable for everybody," she said.
She argued the product may be best for people in late retirement.
While the Government has promised those 400,000 people reaching retirement every year free face-to-face guidance on their income options, Ms Altmann said this might require incentivising employers to provide financial planning assistance.
Officials from the Financial Conduct Authority admitted to the committee the Treasury had not shared with the regulator its modeling on the impact of its changes to annuities.
But Chris Woolward, director of policy, risk and research, insisted the reform would not necessarily lead to poorer deals for those who still want to buy annuities.
"In general, when you have more competition you tend to get better results for consumers," he said.
John Thurso, the MP for Caithness, Sutherland and Easter Ross, questioned whether consumers are capable of assessing their likely longevity and warned the changes risk creating a "potential regulatory nightmare" with consumers left "bemused" by the new rules.
David Geale, head of savings, investments and distribution said: "There are suggestions people somewhat underestimate (their life expectancy)."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article