The pension industry has welcomed the new Government’s confirmation that it will end the rules requiring compulsory annuitisation at 75.
The pledge, outlined in the coalition policy agreement, reflects promises made in both the Conservatives and Liberal Democrats’ manifestos.
The parties have not revealed any details yet but should give more information on how this would work in the emergency Budget.
It could involve pushing the age 75 threshold back to either 80 or 85 years or making the alternatively secured pension rules far more flexible with a significantly reduced tax on death. It currently stands at 82 per cent.
Former Conservative Shadow Pensions Minister Nigel Waterson, who lost his Eastbourne seat at the election, had said the Tories were looking at allowing lump-sum withdrawals from pensions with an appropriate tax charge provided the individual has enough guaranteed income to stay off means-tested benefits. This is still on the cards.
Scottish Widows head of pensions market development Ian Naismith says: “I strongly suspect the agreement in the coalition document was based on no more than a common view that something needs to be done and the individual parties may well not have fully formed views. This gives an open door for the industry to suggest solutions that will make a real difference.”
Hargreaves Lansdown head of pensions research Tom Mcphail welcomes the coalition Government’s “sensible” pension policies.
He says: “The Government appears to have done more to set the UK’s pension system back on track in its first day than the previous administration managed in 13 years.
“The abolition of compulsory annuitisation may not be relevant for the majority of investors because their savings will not be substantial enough to take on longevity and investment risk after retirement. Nevertheless, the fact that investors will be able to retain control over their own money will encourage saving in the first place.”