Market comment

For professional advisers only

We support new thinking on retirement issues

23 September 2009 | Back
I welcome the fresh approach to pension reform presented by the Centre for Policy Studies (CPS) in its new report: Don’t let this crisis go to waste: a simple and affordable way of increasing retirement income.

For some time now Living Time has been campaigning to bring wider choice and better value to the UK’s retiring population. This report makes some radical and innovative suggestions aimed at building sustainability to Britain’s in-retirement landscape which we hope policymakers in the UK will consider very carefully.

The proposal to develop Flexible Retirement Savings Accounts (FRSA) to replace Personal Accounts demands attention by all those involved in shaping the future retirement planning for UK plc. FRSA provide greater flexibility than Personal Accounts and still allow retirees, where they require it, to take financial advice; something we strongly support.

The report’s recommendations include:

  • Replacing Personal Accounts with a new defined contribution-based, state-sponsored, retirement savings scheme called ‘Flexible Retirement Savings Accounts’ to eliminate the risk of mis-selling and to provide more flexibility to future retirees.
  • Increasing the State Pension substantially 10 years after the State Pension Age, allowing retirees to concentrate their FRSA derived income on ten years of active retirement immediately following the state pension age, rather than having to stretch it out until they die, via an annuity.
  • Giving savers the ability to bequeath their unused pension assets to third parties free of any inheritance tax (IHT) liability, provided that the assets go into a retirement savings scheme, to encourage a cascading of wealth down the generations and reinforce the sense of personal ownership of those assets.

 

I can relate to some of the principles recommended by the CPS in that we have sought to incorporate these into the innovative design of the Living Time Fixed Term Annuity, particularly in terms of giving retirees control over their fund whether they want to defer taking an income for a period of time, or set specific levels of income.

Importantly, and in line with the report’s recommendations, Living Time's Fixed Term Annuity also gives retirees the ability to pass any of their unused fund to their beneficiaries, unlike conventional annuities where it remains with the product provider.

ENDS