Pensions

Baroness Greengross Excerpts

Thursday 21st October 2010 Lords Chamber

Asked By

[Baroness Greengross]

To ask Her Majesty’s Government how they will ensure that people get value for money when purchasing a pension annuity.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

The Government believe that it is important to incentivise individuals to save for retirement and recognise the importance of the annuities market. We support the open market option, which enables individuals to shop around for the best rate, and continue to consider ways to make this more effective. Complementing this, we will continue to work with interested groups to improve the quality of pre-retirement advice, including seeking independent financial advice, so that consumers can make an informed choice on how best to draw benefits from their pension fund.

[Baroness Greengross]

I thank the Minister for that helpful reply. However, as we know, many potential annuitants do not realise that there is an open market option. Has the noble Lord considered introducing the approach that the Pension Income Choice Association, PICA, has put forward? It believes that the default option should be for everyone to have the opportunity to review their options when they retire. It would like to see the production of a personalised statement—a sort of passport—which would contain sufficient information for people to use to obtain quotations.

[Lord Sassoon]

My Lords, I am grateful to the noble Baroness for raising this important topic. Some 450,000 annuity policies are written every year, with around £11 billion in annual premiums. I am aware that the Pension Income Choice Association has recently met my honourable friend the Financial Secretary to discuss its proposals. We encourage consumers to shop around under the open market option and we welcome all suggestions as to how this can be made more effective.