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Revenue rethinks protected rights rules

Pensioners retiring with protected rights no longer have to buy a spouse&#39s pension from their annuity, regardless of whether or not they are married.

The Inland Revenue has relaxed rules for buying annuities with protected rights, with the changes effective from April 6. Prot-ected rights are built up from contracted-out rebates and are kept in a separate fund. Previously, even those who were unmarried had a spouse&#39s benefit deducted from their annuity.

But IFAs wanting annuity quotations on the new basis have run in to problems in finding providers which can cope with the changes. Most companies are unable to offer quotes on the new basis and have been telling IFAs that it will be weeks before they can get new rates.

A £20,000 protected rights fund for a male aged 60 with a five-year guarantee would have bought a pension of £923.40 a year with a 50 per cent spouse&#39s pension. Without the spouse&#39s pension, it increases to £1,032.12.

Hargreaves Lansdown pensions development manager Danny Cox says: “This is good news for single people who have protected rights. It can make a very big difference to the pension they can buy. But it appears most providers are not yet ready to quote on the new basis.”

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