David Curry says pensioners should have more flexibility

In recent years, falling interest rates and longer life expectancies mean that the amount of annual income a pension fund can buy has been falling.

As well as lower returns, many people are also unhappy that they cannot pass on the money they have invested in their pension plans on to their heirs.

Campaigners for reform want to see people having greater choice over what they can do with their pension pot.

Last month, Conservative MP David Curry proposed reforms that would see pensioners having to buy an annuity sufficient to keep them off benefit, but they would have greater freedom over the remainder of their pension fund.

Review

Chancellor Gordon Brown announced in his pre-Budget report that the Government was to carry out a review of the annuities market.

But the government has already said that the 75 age limit will not be changed.

Instead the government is looking to increase flexibility and make sure pensioners buy the best possible annuity with their pension fund.

Economic Secretary to the Treasury Ruth Kelly said people could improve their income by up to 30% by shopping around for the best deal.

The Government is also proposing introducing limited period annuities, which would allow people to buy an annuity at 65 to provide income for a limited period of time, allowing them to reassess their needs in the future.

It is also suggesting allowing people to switch providers even after they have bought an annuity.

"We want everyone to be able to buy products which meet the individual needs and provide good value for money," Ms Kelly said.