LONDON, July 20 (Reuters) - Britain will on Monday announcenew rules for the pensions industry that will give retireesgreater access to their savings, fleshing out plans announcedearlier this year that shook the share value of Britishinsurers.
Finance minister George Osborne stunned Britain's pensionsindustry in March when he scrapped a rule forcing people to buyan annuity, a financial product which converts a retiree'spension pot into a guaranteed retirement income.
Osborne is keen to give people more freedom to tap into thesavings they set aside during their working life by forcinginnovation in the country's 12 billion pound ($21 billion) peryear annuity market.
On Monday, the government will confirm its intention to goahead with such plans, seen as the biggest reform of pensions ina generation, and will add detail to its proposals following aconsultation with industry, employers and consumer groups.
"The reforms to the tax rules are about encouraginginnovation and ensuring consumers have the widest possiblechoice in how they secure their economic future," a financeministry source said on Sunday.
In response to the consultation, the government will onMonday morning set out its intention to give pensioners greaterflexibility over the way their savings are paid out.
This will include outlines for new annuity products whichtailor for early lump-sum withdrawals and regular payments thatvary over the lifetime of the product to meet the demand ofretirement expenses such as care costs.
Annuities will also be allowed to provide a guaranteedpayout, even if the recipient dies, for much longer than thecurrent 10-year limit, the source said.
When Osborne first announced the shake-up earlier this year,it hit the share value of firms like Legal and General,Aviva and Standard Life who run annuitiesbusinesses. Those shares have since recovered slightly, butremain below their pre-announcement levels.
The price of long-term British government bonds,which are used by annuity providers to manage risk, also fell.
($1 = 0.5851 British Pounds) (Reporting by William James; Editing by Sophie Hares)