MM Leader: Top of the reform
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Money Marketing welcomes the Conservative Party’s commitment to scrap forced annuitisation.
The Tories would end the requirement to buy an annuity by age 75 and introduce new rules requiring people to retain enough of their pension pot to ensure they can look after themselves.
The majority of people would still annuitise before 75 but that is no argument to keep the status quo. This change would allow a growing number of people to make more of their pension pots in what could be a long and expensive retirement period.
But the biggest argument in favour of abolishing forced annuitisation is the signal it sends to future savers. The current rules act as a disincentive to save, with people concerned about losing control of the assets they accumulate.
Individuals can already move into Asp as an alternative to annuitisation but this route is not well understood and comes with a punitive tax rate of 82 per cent on death.
If the Tories get into power, they must strive to achieve the pension simplification that the current administration promised us but failed to deliver. Scrapping forced annuitisation would be a great start.
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Readers' comments (2)
David Trenner - Intelligent Pensions | 11 Feb 2010 3:43 pm
"Scrapping forced annuitisation would be a great start."
I disagree. If scrapping forced annuitisation at 75 is linked to complicated "rules requiring people to retain enough of their pension pot to ensure they can look after themselves" there will not be simplification.
A great start to simplification would be to abolish the requirement for everyone with any size of pension fund to complete the horrendous forms required to prove that their pot is worth less than £1.75m! A simple declaration that their pensions are worth less than, say £1m, would help everyone trying to draw benefits from any pension scheme.
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Tom Murray | 12 Feb 2010 11:54 am
Scrapping annuitisation will be a big step forward in allowing people to feel in control of their future. I agree that one of the biggest reasons that people look to property investments etc. rather than pension saving is the fear that they will lose control of their assets at a time in their life when they will no longer be in a position to accumulate more. This move will remove one of the major objections consumers have to pension saving.
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