Election 2010: Tories confirm plans to end 'obligation' to buy annuity at 75

The Conservative Party today confirmed it would "reward" those who had saved for their retirement by ending the effective obligation to buy an annuity at age 75.

The announcement was made in its manifesto - Your invitation to join government - and follows a promise made by George Osborne in a speech made at the British Museum in February.

Plans to bring forward the date at which the state pension age starts to rise to 66 were also outlined - not be sooner than 2016 for men and 2020 for women.

Under the Tories public sector pensions above £50,000 would be capped, and they promised to consult with the Independent Parliamentary Standards Authority on how to move away from the "generous" final-salary pension system for members of parliament.

Launching the manifesto this morning at Battersea Power Station, the party said it would “reinvigorate” occupational pensions.

Plans include working with employers and industry to support auto-enrolment into pensions, and addressing a "growing disparity" between public sector pensions and private sector pensions while protecting accrued rights.

The party also pledged to start to reverse the effects of the abolition of the dividend tax credit for pension funds, when resources allow.

Elsewhere, it confirmed it would implement the parliamentary ombudsman's recommendation to make "fair and transparent" payments to Equitable Life policyholders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.

It said: "We must not let the mis-selling of financial products put people off saving."

Today's manifesto comes just weeks after work and pensions spokeswoman Theresa May outlined six specific actions a Conservative government would take on pensions. These were:

- The 2012 reforms for auto-enrolment and personal accounts will be addressed: auto-enrolment may be brought forward from 2012 on a voluntary basis, allowing employers to plan for implementation. Concerns over ensuring sufficient saving in the new personal accounts by lower and middle earners will also be tackled.

- New approaches to allow companies to keep defined benefit schemes will be explored, as will hybrid schemes with elements of defined benefit and contribution. Regulations which make it harder for companies to operate such schemes will be reviewed. Measures which increase volatility on a balance sheet or restrict a company's ability to adapt to changing circumstances were also earmarked for close review.

- The obligation to buy an annuity by 75 will be removed, and people will be given more flexibility once retired.

- The state pension link with earnings would be restored, paid for by increasing the state pension age to 66 (by 2016 for men and 2020 for women) - in line with a consensus in the UK and western Europe on the need to raise the retirement age.

- The default retirement age would be reviewed to allow for greater flexibility in working beyond that age where it is practical to do so.

- Practical measures to encourage savings will be considered, including early access to pensions savings, as already happens in countries such as New Zealand and the US.

Last month, Professional Pensions, IFAonline's sister title also interviewed Conservative pensions spokesman about his party's plans should they take office (PP Online, March 7). To see the full interview, click here.