George Osborne’s budget contained some radical pension reforms, but for the broader investment ecosystem there is less than meets the eyeby Nick Carn / March 20, 2014 / Leave a comment
Osborne’s Budget is aimed at capturing the valuable pensioner vote
There’s no doubt that the Chancellor’s reform of pensions announced in yesterday’s budget are radical ones, not only from a practical but also from an ideological point of view. Clearly something had to be done. As interest rates have tumbled, so annuity rates have converged on a rate equivalent to a staged return of the pensioner’s capital—minus, of course, the high costs and charges typical of retail financial products. Since only certain sorts of institutions are able to offer annuities a regulated oligopoly has been more or less able to dictate its own terms.
Government mandated monopolies, limited competition and restricted choice usually add up to a bad deal for the consumer and the annuity market has proved no exception. Allowing all pensioners the range of options which were only previously available to those with either very big or very small pension pots breaks the stranglehold of the annuity providers.