LONDON, July 20 (Reuters) - Britain will on Monday announce new rules for the pensions industry that will give retirees greater access to their savings, fleshing out plans announced earlier this year that shook the share value of British insurers.
Finance minister George Osborne stunned Britain’s pensions industry in March when he scrapped a rule forcing people to buy an annuity, a financial product which converts a retiree’s pension pot into a guaranteed retirement income.
Osborne is keen to give people more freedom to tap into the savings they set aside during their working life by forcing innovation in the country’s 12 billion pound ($21 billion) per year annuity market.
On Monday, the government will confirm its intention to go ahead with such plans, seen as the biggest reform of pensions in a generation, and will add detail to its proposals following a consultation with industry, employers and consumer groups.
“The reforms to the tax rules are about encouraging innovation and ensuring consumers have the widest possible choice in how they secure their economic future,” a finance ministry source said on Sunday.
In response to the consultation, the government will on Monday morning set out its intention to give pensioners greater flexibility over the way their savings are paid out.
This will include outlines for new annuity products which tailor for early lump-sum withdrawals and regular payments that vary over the lifetime of the product to meet the demand of retirement expenses such as care costs.
Annuities will also be allowed to provide a guaranteed payout, even if the recipient dies, for much longer than the current 10-year limit, the source said.
When Osborne first announced the shake-up earlier this year, it hit the share value of firms like Legal and General, Aviva and Standard Life who run annuities businesses. Those shares have since recovered slightly, but remain below their pre-announcement levels.
The price of long-term British government bonds, which are used by annuity providers to manage risk, also fell.
$1 = 0.5851 British Pounds Reporting by William James; Editing by Sophie Hares