'Hated annuity rules set to stay'

THE Government is shying away from wholesale reform of the hated pensions annuity rules in the wake of this week's pre-Budget report. Chancellor Gordon Brown announced on Tuesday that an Inland Revenue consultation paper on annuities will appear before the end of the year. Any changes will be introduced in next year's finance bill.

But experts say the review is unlikely to result in a significant overhaul. The current rules have been widely slammed for locking people into low returns for life and depriving them of the right to leave assets to their heirs.

Annuities have plunged dramatically, by an average of 48% in 10 years, because of low interest rates and longer life expectancy.

Experts say the Government is unlikely to scrap compulsory annuities, a move recommended by former Labour MP Oonagh McDonald in an earlier report. Ministers believe this would benefit only a wealthy minority of those retiring. Instead, the review will look at raising the maximum age at which people must take an annuity from 75 to 80. It is also likely promote the 'open market option', allowing pensioners to shop around for the best rate.

Ian Luder, senior partner in private client tax services at Andersen Consulting, said: 'I am disappointed. This does not get around the angst that lots of people feel.'