Tory Shadow pensions minister Nigel Waterson has tabled proposals to remove age restrictions on annuity protection lump-sum death benefits.
Waterson wants to change the rules in the 2004 Finance Act which dictate that annuity policyholders cannot pass on death benefits if they die after the age of 75.
The proposals are part of a series of proposed Conservative amendments to the Pensions Bill and private members’ bills designed to scrap compulsory annuitisation.
Aegon head of pensions development Rachel Vahey says annuity payments already received by the deceased should be subtracted from the value of the pension pot and the resulting funds, subject to tax, should be passed on as death benefits. She says: “This means removing the cliff edge of payment of benefits and is the sort of change we need for pensions to be transparent.”
Anand Associates financial architect James Brooke says: “It would cause a minimal increase in annuity rates as the majority of the cross-subsidy enjoyed by those who live longer has disappeared.”
Waterson says: “Young people are very wary of saving money for 40 years and then losing all control of it at 75.”