Ever since the Chancellor’s Budget announcement, the grapevine has had it that annuities are going to wither and die on the vine.
But news of the death of these important retirement income vehicles is a bit premature.
It is true the Chancellor’s radical overhaul of the pensions landscape will open up investment opportunities in historic and transforming ways, and a major casualty of that change will be conventional annuities.
However, financial engineers and their actuarial colleagues are hard at work as we speak, devising all kinds of variable annuities to meet the demands of the new environment.
By the end of this tax year, and in time for the new arrangements, there will be all kinds of new products, many of them hybrid annuities, offering annuitants the opportunity to guarantee a minimum income — the safety net — while allowing them to invest a proportion of the pot in high-performing vehicles.
It is a decision that can only be made by individuals and their partners, with expert advice from their financial advisers. There can be no acceptable template as to how people should access their pots, what they should take as tax free and how best to invest the rest.
As we have said before, the changes announced in the Budget were necessary, and in this day and age it is an insult for the state to nanny us and our savings as if we are gross incompetents.
The duty of the state, and its only obligation, is to make sure that those people who access their pension pots do not blow the lot buying Lamborghinis, then go cap in hand, at an even older age, expecting the state to rescue them.
That is an understandable moral hazard in the Osborne plan, and one that we must guard against.
Systems must be put in place to guard against any such recklessness; part of the guidance given to pensioners must include a warning that, even at the risk of re-introducing poor houses, these miscreants would be on their own.
The taxes and savings of prudent and responsible savers cannot — and should not — be used to rescue the feckless.
One development we would like to see is that of a junior Treasury minister having responsibility for financial education. The ball is back in your court, Chancellor.
