Pensions minister floats plans for switchable annuities

Pensions minister Steve Webb has floated plans to allow pensioners to switch annuities as part of proposals for a radical overhaul of the private pensions market.

In an interview with the Sunday Telegraph, Webb said he wanted pensioners to be able to change to better annuities, in the same way homeowners can switch mortgage deals every few years.

Steve Webb set out a blueprint for reform of the post-retirement market, which also includes plans to tackle ‘the whole issue of cost’ for those buying an annuity and ‘hidden charges’ from insurers.

He told the paper: ‘When you take out a mortgage, in a few years if rates change you can switch your mortgage,’ he said. ‘But when you take out an annuity, that’s it, for life. This could easily be for a quarter of a century.’

‘Why shouldn’t you be able to change your annuity provider so a few years later somebody else could offer you a bigger pension? Why shouldn’t you be able to shop around?’

Webb also accused insurance firms of ‘murky’ practices when selling annuities.

‘There are almost murky things at the point where you buy an annuity,’ he said. ‘There are odd percentages going in funny places for no good reason.’

Webb said the blueprint had not become formal policy, but that he was determined to examine how to make pension payments more flexible.