Compulsory annuity purchase, - which requires someone retiring to purchase an income-producing annuity with their pension fund, regardless of how poor the return may be from the gilts market, may be the bane of ordinary pensioners' lives.
However, there is one group of pensioners who can defer the purchase of an annuity for at least five years after they retire - company directors who have arranged Small Self-Administered Pension Schemes (SSAPS).
Self-administered schemes are still very much an exclusive option for a minority of pensioners who can afford to make usually substantial annual contributions and can pay for an independent adviser (who must be approved by the Revenue Commissioners) to act as administrator and trustee of their schemes. It can cost £3,000-£4,000 on average to set up such a scheme, and there is an annual management charge of about 0.50.75 per cent of the value of the investment fund. The tax advantages and lower charges structure (there are no insurance company middle-men to pay) tend to produce better returns - as long as the right investment mix is set up.
At a one-day seminar last week sponsored by independent advisers, The European Pensioner Trustee Company, the annuity issue was addressed by the Revenue Commissioner's inspector in charge of pensions, Mr Clive Slattery. He acknowledged the difficulties pensioners were facing in the current annuity market. He expected major developments over the next two years as the recommendations of the National Pensions Policy Initiative were gradually introduced. Mr Slattery dispelled rumours about the Revenue Commissioners' attitude towards SPPAS and the suggestion that they triggered Revenue audits: the schemes, "are neither liked nor disliked" by the Revenue, he said, and were available to the public as long as they were properly monitored by a Revenue-approved pensioner trustee. He said it was incorrect to suggest that having an SPPA would trigger a Revenue or pension audit. Most private companies could expect an audit at some stage anyway, he said.
