Oonagh McDonald, director of the Retirement Income Reform Campaign (Rirc), has urged the government to adopt Retirement Income Funds (Rif's), as a reform model for pension income in the UK.
McDonald says the UK should adopt such a system; successfully entrenched in Canada for the past twenty years.
Not only does the model give individuals a choice whether to purchase annuities, but also awards the extra option of drawdown income at a sustainable level, which allows their pensions to form part of their estates on death, subject to taxation.
Rirc has submitted a report to the Pensions Commission in time for the UK Pensions Experts Conference called by Adair Turner for next week, and is calling on policymakers to devise methods of encouraging consumers to take up individual savings. It is also calling for fairness to the treatment of private savings to be restored in a lament similar to that of the LibDems yesterday.
The campaign group proposes the Rifs be managed separately from any other assets the individual may have and says it can be invested in a range of financial instruments, including an annuity, while managed according to the needs and aims of the retired individual.
Rirc says there would be maximum and minimum income limits for withdrawals from the fund, with income taxed at the highest marginal rate, adding: “This would ensure that the pension fund would be used to provide income and as it sets the maximum income to be withdrawn, it would ensure that the pension fund was used to provide an income.”
Rirc also favours calls for a more generous basic state pension and the phasing out of pension credit.
McDonald says: “We have published this expert analysis at this important moment as greater consideration needs to be given to the policy alternatives available, some of which have been operating extremely successfully for some time internationally.”
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