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Advisers welcome Treasury U-turn on RPI-linked annuities

Advisers have welcomed the Treasury’s abrupt U-turn on plans to prevent savers using RPI-linked annuities without a floor to meet the minimum income requirement for flexible drawdown.

In May, Money Marketing revealed that tens of thousands of savers with index-linked annuities offering no protection against deflation would not be able to use these assets to fund the £20,000 MIR under draft regulations.

But legislation laid before the House of Commons on Friday says annuities linked to the retail price index will now be considered as relevant income for the purposes of meeting the MIR.

The new legislation will come into force on August 11.

Standard Life head of pensions policy John Lawson says: “Under the new legislation, annuities are allowed to vary in line with the RPI without having to have a floor for the purposes of meeting the minimum income requirement. This is a win for the industry and a win for common sense as well.”

Worldwide Financial Planning IFA Nick McBreen says: “This is a sensible decision. Excluding RPI-linked annuities did not make an awful lot of sense. Advisers now have a bit more clarity to plan for flexible drawdown when it does eventually take off with providers.”

However, under the new rules, investment-linked annuities without a guarantee will not count towards the MIR.

AJ Bell technical marketing manager Gareth James says: “The inclusion of RPI-linked annuities was expected and is positive news. It is disappointing that this good news will not extend to all investment-linked annuity holders. They will only be able to count the guaranteed element of their annuity, if such a guarantee exists.”



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What price (more) freedoms?

George Osborne will make his last Budget speech of the current parliamentary term this week, and the early media briefings suggest that pensions will again feature heavily in that statement. So what are we able to learn from the weekend’s coverage?


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