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AMP urges action to keep widows&#39 lump sum benefit

AMP is calling on the industry not to miss the consultation deadline to

stop changes to contracting out which would see widows under 45 forced to

take an annuity.

Under DSS recommendations, widows under 45 with no dependent children

would be unable to take a tax-free lump sum on the death of their spouse

and would have to buy an annuity.

The consultation paper was issued in May and the deadline for responses is

July 31.

AMP estimates around 20 per cent of its policyholders would have to take

an annuity. It wants life offices to respond to the consultation paper to

retain the lump sum benefit.

It says the changes would incur considerable costs for life offices as

they will face more admin.

AMP senior pensions adviser Sue Connolly says: “We do not think that

people under 45 would want an annuity at that age and there are tax

implications. An annuity is subject to income tax, where a lump sum is

tax-free.”

A Department of Work and Pensions spokesman says: “The recommendations are

aimed at simplification and removing areas of duplication. The consultation

is still open and we are interested in receiving all views.”

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