Government urged to keep annuity income simple
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LV= and the Investment Management Association have called on the Government to keep simplicity at the heart of changes to retirement income rules.
The Government is reviewing alternatives to compulsory annuitisation at age 75 and its consultation closed on September 9.
LV= says getting rid of the age-related annuity rule will make pensions a more attractive savings vehicle but only if people understand the rules that are put in place.
Instead of complicated minimum income rules, LV= suggests that the current cap on income withdrawal before age 75 should remain at 120 per cent of the Government Actuary’s Department’s rate and there should only be a small reduction in this cap after 75.
LV= retirement solutions director John Perks says: “A simpler system that may, in rare circumstances, allow someone to fall back on the state is much better than one that removes all such possibilities. We feel that, in the simpler regime, people will be much more likely to build up savings and reduce the risk of them depending on the state.”
The IMA agrees that the rules should be as simple as possible. It says instead of setting a minimum level of income, a simple test based on a minimum capital amount could be introduced.
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