The Government is planning an additional boost to savers by increasing the maximum income people with investment-linked annuities can take from their fund, Money Marketing understands.
Chancellor George Osborne stunned the pensions industry last week when he announced plans to dramatically increase the flexibility of the UK system.
From 27 March the flexible drawdown minimum income requirement will reduce from £20,000 to £12,000, while the maximum income a person in income drawdown can take will rise from 120 per cent of GAD to 150 per cent.
The Government is also significantly increasing trivial commutation limits this year before removing all restrictions and allowing anyone aged 55 or over to take their entire pension pot as cash from April 2015.
While details of how the rules will apply to investment-linked annuities have yet to be released, Money Marketing understands officials have indicated they will allow providers to increase the maximum withdrawal from 120 per cent to 150 per cent of the equivalent annuity.
MGM Advantage pensions technical director Andrew Tully says: “I am optimistic we will get changes to investment-linked annuities in the short-term which will give increased income flexibility in a similar vein to the drawdown changes announced in the Budget.
“Then, after 2015, there is likely to be full flexibility to develop all annuities to give people a range of solutions combining flexibility with some form of guaranteed income which many retirees want.”
Annuity Line head of business development Billy Burrows says: “The Government had to create a level playing field between the two products but in most cases advisers will not recommend a client takes 150 per cent of the equivalent annuity from their fund.”