Standard Life PBR response - Government block third way annuity products

Edited by the Insidemoneytalk editorial team Oct 11, 2007

The Government has decided to stop the progress of 'third way' annuity products, which would allow consumers to receive a guaranteed income and still benefit from any future investment returns.

This type of annuity is very popular in the US and Japan, and it was hoped that the Government would introduce the necessary tax changes to remove some barriers to their operation.

The Government said that these products would potentially only benefit a small number of consumers with large pension funds.

This is not the intended market for third way products.

Currently people have the option between an annuity and an income drawdown product.

Annuities lack popularity due to their lack of flexibility and poor death benefits.

Drawdown products are not suitable for everyone as they carry a degree of risk.

Third way products have the potential to appeal to a broader range of customers for whom existing products are insufficiently attractive.

John Lawson, Head of Pensions Policy at Standard Life said: 'The UK Government wants to see itself as an innovative leader in financial markets but this particular decision lacks foresight.

Clearing the way for third way annuity products would have greatly increased the choices available to people reaching retirement.

Third way products have the potential to be enormously popular in the UK, as they are in other countries, and it is unfortunate the Government seem unwilling to open the door.

This seems to be based on a misconception that these products would only appeal to a narrow section of the population - this is incorrect.

In the US around 80% of people reaching retirement use these products rather than conventional annuities.

We hope the Government will reconsider its stance in the near future.' If you would like to discuss this in more detail please contact: John Lawson, Head of Pension Policy, 0131 245 7548 Andrew Tully, Marketing Technical Manager, 0131 245 4051 Paul Keeble, PR Manager, 020 7872 4481 / 0771 248 6387 09 October 2007.