IRELAND - The government should reconsider the obligation for defined contribution occupational scheme members to buy annuities at retirement, a study on the Irish annuity market recommends.
There was "no logical reason" for this "inequity" in the pension sector, consultancies Indecon and Life Strategies noted in a report now published by the Irish government.
"The restrictive obligation to annuitise one's accumulated fund at retirement is quite inconsistent with the latitude typically afforded to DC scheme members with regard to investment decisions prior to retirement," the study noted.
Members of other pension schemes can choose other options for their money at retirement such as remaining invested in a so-called Approved Retirement Fund (ARF).
The Irish Association of Pension Funds (IAPF) welcomed the findings of the study as this supports its own calls for ending the obligation.
"Defined contribution pension scheme members are being discriminated against by being forced to purchase high cost annuities at retirement age," the IAPF notes in a statement.
However, in their study the consultants warn against giving up the obligation for annuitisation completely as it would damage the annuity market and "impact on other policy objectives".
They suggest all DC members should be obliged to annuitise a minimum of the retirement fund with flexibility given on the timing of the purchase and to have the option of putting the rest into an ARF.