Is this Armageddon for annuities? Not necessarily says EY

19 March 2014

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Malcolm Kerr, Executive Director at EY comments:

“The changes to rules on pensions will be very liberating for consumers. There’s nothing fundamentally wrong with annuities but at current interest rates they have seemed pretty poor value so the flexibility for consumers to choose an alternative is welcome.

“It’s not necessarily Armageddon for annuities- a lot will depend on interest rates going forward. On the face of it this could seriously dent the annuity market in the short term, but how many people will actually opt to take the cash and invest it is yet to be seen. The fact that the tax rates have dropped will be helpful, but people will still pay tax on all but the first 25% and, depending on what happens with interest rates, an annuity may still be attractive.”

For more information on the 2014 Budget, visit the EY 2014 Budget page.