Pensioners will be allowed to pass the value of their annuity to dependents upon death until age 75 according to proposals outlined in the Government's Pensions Green Paper.
But before any money is passed on it will be hit by a 35 per cent tax, a level set far too high according to IFAs, who say the figure is arbitrary and will penalise pensioners unfairly.
Other measures include pushing forward with limited period annuities and extending phased retirement rights to occupational members allowing them to take part of their pension in an annuity and continue working.
The reforms to the annuity regime do not deal with the age 75 rule and have been branded “timid” by critics such as Retirement Income Reform Campaign director Dr Oonagh McDonald.
Wentworth Rose managing director Philip Rose says: “I do not think they should have applied this tax. The vast majority of these people are going to be basic rate tax payers and all of a sudden they are going to be hit with a 35 per cent tax rate when they die. I think this is a heinous level.”
ABI head of pensions Joanne Segars says: “The cashback is welcome but the Government should not limit it to people under the age of 75.”