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Black and white in grey areas

The general election is almost certain to follow this Budget within a couple of months. Every political party is now targeting the grey vote as crucial to its election prospects.

Take these two points together and you have the potential for this Budget to be the most interesting from a pension viewpoint for many years.

My banker is for Chancellor Gordon Brown to say something significant about retirement flexibility. To me, it seems inconceivable that the Government can go into the election without announcing something about buying an annuity by age 75. My hunch is that this will not be as radical as many would wish but I do expect something significant.

Any change to the basic rate of income tax for 2001/02 – and many suspect an electioneering reduction – will require some quick footwork on the collection of employee and self-employed contributions to stakeholder and personal pensions from April 6.

For example, a person planning to pay a stakeholder contribution on behalf of a non-earning spouse of £2,808 – grossing up to £3,600 on a 22 per cent rate of income tax – would instead pay £2,844 if the tax rate was reduced to 21 per cent.

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