rules are disadvantageous to those with illiquid assets, Investment Week conference is told
UK pension law puts Sipp investors with money in illiquid assets, such as commercial property, at a disadvantage because of the requirement to buy an annuity at age 75, according to providers.
In effect, they are being forced to cash in highly illiquid assets purely because of age rather than because it is the correct point in the investment cycle.
Speaking at the Investment Week Sipp Seminar held in London last month, Steve Conley, head of marketing development, investments and pensions at Sipp provider James Hay Pension Trustees, said compulsory annuity purchase at age 75 is especially unpopular with Sipp holders, particularly where commercial property is involved.
Mike Jackson, head of national accounts at GE Life, said the range of commercial properties into which Sipp investors can invest is now sizeable, extending across hotels, motels, nursing homes and pubs.
The compulsory annuity purchase laws are particularly harsh on commercial property holders, the speakers said. Such investors could be forced to sell into an illiquid market at the wrong time.
Alan Wells, divisional pensions development manager at Norwich Union, said the insurer is quite confident the Government will make helpful changes to pension and annuity law as a result of its current annuity review. The results are expected later this month with the publication of the pensions green paper.
Wells said: 'The Government seems to be resistant to pushing the age of annuity purchase back from 75 or getting rid of the requirement to buy annuities because they think people will not take the annuity. They're concerned it will become just a way of sweeping up property and passing it down generations without having to pay tax on it.'
Intermediaries should bear in mind whether clients' changing circumstances make it important to avoid annuity purchase before the age 75 deadline, he added.
'If a client's spouse has died, the adviser could ask whether the avoidance of an annuity remains appropriate,' said Wells.
The reason for this, he continued, is that the lack of a death benefit guarantee may not be as important to a surviving spouse.
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