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Lock-in could offer fair deal on age 75 rule

Suffolk Life says the Government should require people to lock in to a minimum level of annual income when they buy an annuity at 75 but be allowed to use their remaining pension pot as they choose.

Speaking at the Cofunds fut-ure of retirement planning round table last week, Suffolk Life sales and marketing director John Moret said the age 75 rule is nonsense for wealthy people but makes sense for those with smaller pension pots.

He argued that the Government should require people to buy an annuity that provides a floor level of income of around 10,000 and then give people the freedom to choose what to do with the rest of their pension savings. He said: “The age 75 rule is a nonsense for the wealthy but there are strong arguments for saying that forcing people with small pots down the ann- uity road is actually sensible.

“We should move to a situation where once you have secured a certain level of income through annuity, you have flexibility over what you do with the rest.”

AWD Chase de Vere marketing director Martyn Laverick said: “I agree that you could put in place a system where once you have bought a certain level of annuity, so you never have to be reliant on the state, you could do whatever you want with the rest.”

But Laverick suggested that the Government may withdraw tax relief on pension contributions above this amount.

He said: “The Government might think that if it can get everybody to that level it does not need to give tax relief to anybody who saves any more than that. It could give everybody an 8,000 pension allowance a year and give 50, 60 or 70 per cent tax relief to try to encourage people to save to that level.”

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