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MPs to grill Govt over bungled death tax briefing

The Treasury select committee is to demand an explanation from the Government over the way it announced the changes to the pensions death tax.

Chancellor George Osborne announced at the Conservative Party conference last week that the 55 per cent death tax on pensions would be scrapped on inherited defined contribution pensions in drawdown when a member dies befor age 75.

Stock prices of specialist annuity providers fell after national newspapers reported the tax cut would not apply to annuities, but the Government later confirmed the changes would apply to value protected annuities, where policyholders pay a premium to ensure any remaining annuity payments are passed on if they die. 

Speaking to Money Marketing, TSC member and Labour MP Andy Love says: “The whole thing is a bit of shambles – undoubtedly the decision to announce it at the Conservative Party conference means it was rushed and therefore the way this was handled was totally unsatisfactory.

“Undoubtedly over the next few months we’ll want to take a very close interest in what happened here to make sure the information that’s fed to the public and the markets is accurate.

“This failure is something that’s affected the markets, affected insurance companies and their valuations and caused quite a bit of turbulence – that was unnecessary. We will want an explanation of what went wrong.”



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Whilst they’re at it, they might ask a few questions about the mess of the Guidance Guarantee (such as which bodies are likely to be able competently to deliver it?), what’s become of the £20m that the Government said it was going to earmark for it (what about a voucher system for authorised intermediaries?) and why does the FCA refuse to mandate OM as the default option for pension funds approaching their vesting date?

    Is APFA making any effort to obtain answers to these questions?

  2. I agree with you Julian ref OMO. It should have been made the default years ago. All providers should have been made to put a big bold caveat onto the front page of their illustration stating something like “You could get substantially more income than we can offer by shopping around. We will not be able to pay your pension until you can confirm in writing that you have done so. Speak to your/an adviser or go to” or whatever a website address would be. We could have had such better “consumer outcomes” as the FCA like use before the build up to the most recent reforms.

  3. brian weatherley 8th October 2014 at 2:52 pm

    It seems the Chancellor made only a limited statement at his Party Conference; however, what he did not say was that the changes would not apply to annuities. The National Newspaper then took it upon themselves to state that, based on their interpretation of any indication otherwise, the changes proposed would not apply to annuities. Again, making a story when one did not exist unless clarification of their collective understanding was sought and confirmation received before publication.

    Yes, the lack of any reference to annuities in the limited statement was an obvious and important omission but, in my opinion, of itself would not have impacted heavily on the markets. That it did was in response to the Press reaching a wrong conclusion which, when published, caused the over reaction in the markets. The false impression that the changes did not apply to annuities was of Press making.

    A select committee inquiry? There was no long term effect on the markets which recovered very swiftly once the omission was corrected. There are other issues of greater dimensions which demand parliamentary time and should take priority. Meanwhile, it looks like petty political tactics; the objection to the manner in which the announcement was handled was made by the opposition; not to right the wrongs or to protect pension holders but simply to create an uncomfortable situation for the government. A jaundiced view? At my age I have seen it all before; nothing is new. A curse on all their houses.

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