Standard Life head of pensions policy John Lawson says the Tories are firming up plans to allow people to take their fund as cash as long as they secure a minimum income with an annuity which takes them above the means-testing threshold.
Lawson says: “If this goes ahead, you would have to buy an annuity, which provides an income of around £30 a week to ensure the state will not have to shell out for you. Then you can do what you like with the rest. To be able to do this, people will need around £30,000 to spend on an annuity. For most people, that is more than their entire fund but there are lots of people for whom that is a drop in the ocean.”
But Lawson expects the move to come with a tax charge of between 40-50 per cent, as is the case in Ireland where this is currently allowed.
He says: “It could be great for the Tories because if they allow people to take their money as cash when they retire, people will pay tax on the majority of their fund immediately rather than after 30 years. It could be mutually beneficial.”