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Tories pledge to scrap annuitisation at 75 and hike stamp duty threshold

The Conservative Party has committed to ending compulsory annuitisation at 75, raising the stamp duty threshold to £250,000 and raising the inheritance tax threshold to £1m if they win the general election.

In a document published today, called A New Economic Model, Shadow Chancellor George Osborne (pictured) puts forward eight benchmarks for Britain by which he wants a future Conservative government to be judged.

The document outlines a number of changes the Tories would make to increase the nation’s savings rate, including creating “Britain’s first free national financial advice service”. The Conservatives say they will work with employers and the industry to support auto-enrolment into pensions and restore the link between the state pension and average earnings to counter the effect of means-testing. This will be paid for by raising the state pension to 66 earlier than planned by the Government.

The Conservatives have repeated previous manifesto commitments to scrap forced annuitisation at age 75 and a previous pledge by Osborne to raise the IHT threshold to £1m. The Tories say they would take nine out of 10 first-time buyers out of stamp-duty by raising the threshold to £250,000.

Under Conservative proposals, the party would also set up a new Consumer Protection Agency to replace the FSA, which would be responsible  for protecting consumers of financial services.

To ensure bank stability, the Conservatives would pursue an international agreement to apply an insurance fee on retail banks and prevent retail banks from engaging in large-scale proprietary trading.

Osborne promised to inject more competition into the banking industry by commissioning a competition review, which would inform their strategy on selling the Government’s stakes in nationalised banks. He outlined proposals for a National Loan Guarantee Scheme, using government guarantees to create affordable sources of credit for SMEs.

The Tories also say they would create Britain’s first green investment bank drawing on money currently divided across Government initiatives and private capital to focus on green technology start-ups.

The eight benchmarks against which the Conservatives want to be judged are: to ensure macroeconomic stability, create a more balanced economy, get Britain working, make Britain open for business, ensure the whole country shares in rising prosperity, reform public services to deliver better value for money, create a safer banking system and to build a greener economy.

Liberal Democrat Shadow Chancellor Vince Cable said Osborne’s eight benchmarks are “motherhood and apple pie politics”.

He says: “We all want to see a stable, growing economy. The question is how we get there, and on this the Tories have no answers. The Liberal Democrats want to split up the banks so that taxpayers no longer have to underwrite reckless risk taking.We will create a fairer tax system with an income tax cut which will make work pay for those on low incomes.”

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Comments

There are 29 comments at the moment, we would love to hear your opinion too.

  1. A common sense initiative that will please many people. Finally, someone is letting people chose as to what they can do with their hard earned savings pots However this will come at a cost to the taxpayer

  2. Alan — I mentioned last week that the Tories are looking to scrap the age 65 rule. Confirmation in today

    John

  3. Incompetent Regulators Awards Team 2nd February 2010 at 1:19 pm

    Some common sense in there I see…………….. Lets have a bit more e.g. sack all associated with the FSA etc

  4. Please ignore last comment! Meant to send email!!!

  5. Don’t like any of the parties but let’s be honest here – most of us will want to buy an annuity because of the effects of mortality drag and need for income by age 75 unless we are in one of the wealthiest households in the country. The £1m IHT threshold helps only the top 10-12,000 richest households in the country and the stamp duty threshold raise should be limited to owner occupation purchases only not second homes and BTL if they really want to help first time buyers – otherwise prices will artificially rise and go boom and bust again.

  6. Jason Stather-Lodge 2nd February 2010 at 1:23 pm

    nice to see some substance here and the fact that they are sticking to commitments previously made.

    It would though be nice to see additional tax breaks for entrepreneurs and use of the tax system to decrease the burden on employers, giving reduced NI and a 10% CT rates in first two years of a business life and for profits below certain levels.

    We also need to drive investment in the manufacturing base and further increases in capital allowances to support investment in businesses would be a great way of supporting this.

    Good first move though and positive.

  7. Well apart from the hit to my business from lost IHT business I do think it sounds well thought out.

    I think the 75 limit on pensions has been outdated for the last two decades so is a no brainer (well for a politician with a brain)

  8. Yes, but scrapping compulsory annuitisation at age 75 will be of little if any practical benefit if the level of income that may be drawn from an alternative retirement income product is still dictated by the GAD.

    On its own, this announcement doesn’t go nearly far enough, and nor does it address the almost as important issue of lack of inheritability (free of tax) of unspent funds in retirement. But it is at least a start. Any step forward from where we are now under Crash Gordon has to be welcomed.

  9. Still sounds like a manifesto for HNWIs, and not the ordinary man in the street who is more likely to buy an annuity rather than worry about the value of his fund at age 75 and any IHT implications. Same old cronyism.

  10. Will “Britain’s first free national financial advice service”. be regulated too?

  11. Thank you Mr Osbourne – I’ll be an out of work IFA who can claim their state pension age 100.
    But on the bright side I’ll have no IHT to pay and caN defer my annuity purchase (just a pitty that I won’t have an estate of £1m or the need to defer my annuity purchase like some 90% plus of the UK population!!)

  12. The sooner the Tories ‘show their hand’ with regards to the changes they have in mind for the Economy; Taxation and in particular, the Financial Services Industry, the sooner we can start planning for our future.

    My ‘parting shor’ is that anything must be better than this unpopular, unelected and discredited Labour Government!

  13. Wow – sounds too good to be true. How are we going to pay for it….ahhh that’s the catch

  14. Hot air? Is that something we can harness in order to reduce CO2 emmissions?

    SCRAP stamp Duty.

  15. I am all for open competition and choice for the consumer.Helping SME’s with cashflowis also a good thing and should stimulate economic growth, Mr Osborne does not explain how these plans will be implemented and how can most of the population be able to access new schemes. In principle it seems an overall better regime than current arrangements but again how is this all going to be paid for as the money for thse schemes needs to come from somewhere!

  16. I am glad to see that the Tories are sticking to what they have said before, unlike their stance on Europe, when Cameron said only year ago about them being “the only party sticking to its promise to hold a referendum on Europe”, a promise that was dropped at the first available opportunity quite recently.
    The jury is out on politicians and their promises as far as I am concerned. If they think we have short memories they will be surprised. Be assured, however, that I fully intend to use my vote at the next Genreal Election and would not be surprised to see a hung parliament.

  17. Saying that a £1m IHT threshold will only help a few people is contradicted by the fact that that IHT planning attracts so much attention from the finance industry generally and other related industries, e.g. publishing and professional education, right through to the conference facility provision industry (for IHT events).

    Increasing the IHT threshold to £1m will enable many people to stop worrying about the possibility that their estates will have to pay this tax. Much of this worry is caused by past increases and future projected increases of house prices.

    IHT puts up the cost of estate administration and can lengthen the time that beneficiaries have to wait before receiving the assets that have been left to them.

  18. I should like any incoming government to offer annuities for sale to UK pensioners as an alternative to it selling gilts to all and sundry.

    Correctly priced, this would particularly help people with moderately sized pension pots who wish to buy an annuity in the next few years, during which time the government wil otherwise have to raise money through gilt sales instead.

  19. Once more we see post codes determining who benefits by what amount, these moves in figures are simply to win votes and hardly imaginative Stamp Duty tax reforms which is what we need. Of course we want 1st time buyers to be given incentives but £250k in most areas of the UK will actually benefit 3rd time movers. Simply scrap SD for all 1st time buyers. By all means increase the entry level to £250k but come on Osbourne surely you can do better than this? Or is it same old, same old!

  20. Crash test dummy Gordy Brown took years to bring the country to its knees, give them time to put Humpty Dumpty back together guys.

  21. Annuities are an anachronism. There is a short supply of long terms gilts and mortality drag increasingly will not benefit standard annuity rates as impaired life cases are creamed off by impaired life annuity providers. This is a breath of free and fresh air.

    Lets hope that the FSA changes are as radical!

    SIMON MANSELL
    TEMPLE BAR IFA LTD

  22. A good start but.... 2nd February 2010 at 3:35 pm

    A good start but this does not tackle the real problem for the majority of WORKING voters, which is that Labour’s tax system treats everyone earning a modest 30k to 40k as stinking rich.
    The Income Tax, National Insurance Tax and Council Tax extotionate levies on ordinary workers are at immoral levels to say the least.
    If you add personal NI and employer NI together they are higher than the basic rate of income tax.
    Now that what I call a tax on jobs!
    If the Conservatives set out how they intend to reduce the tax burden on ordinary workers they might just see their lead in the polls jump several points.
    How about raising VAT to 22% and reducing NI across the board?
    How about raising Stamp Duty and reducing NI?
    How about putting say 2p on fuel and reducing NI?
    How about saying they will reduce the quango bill by say £80 Billion and use the money to increase the nil rate income tax band to say £10k
    Stop working tax credits and simple raise the nil tax threshold.

    Help the ordinary workers and you might just win a landslide.

  23. My comment posted at 2.22 pm was perhaps poorly phrased.

    Simon Mansell refers to gilts being in short supply as a reason for annuities to be considered an anachronism.

    We know that the next government will have to issue vast quantities of gilts. Meanwhile there is a current shortage of gilts that are suitable to be used by insurance companies as cover for annuities.

    Why not then have the government take advantage of this by having it sell annuities instead of issuing gilts? This would match the need of UK pensioners wishing to convert their cash pots into fixed income with the government’s need to borrow.

  24. I think people are missing the point about the annuity bit at age 75. If you want an annuity you can have one. But if you don’t want one it may be because you want to save the fund as a lump sum for the use of descendents (less the tax on the lump sum). Children can take the lump sum and get some of the tax back by putting it in ther pension pots.

  25. You do not currently have to buy an annuity at 75.

  26. Anonymous | 2 Feb 2010 3:35 pm

    There are a lot of good comments above. Personally I’d repeat what anon at 3.35 said “A good start but this does not tackle the real problem for the majority of WORKING voters, which is that Labour’s tax system treats everyone earning a modest 30k to 40k as stinking rich.” Raise the tax threshold and reverse the dependancy on the state in doing so. Many people don’t want to have to claim for things simply to get back the equivalent they have alredy paid in tax and NI….

    Increasing the nil tax threshold will not benefit ME directly, but it will reduce the amount of administrative time everyone spends on sorting out this mess….

  27. john - we still need a minimum 3rd February 2010 at 4:25 pm

    To avoid people falling into Minimum Income Gtee levels, maybe the Tories should insist on a minmum annuity secured first eg 5kpa index linked

  28. At last we have an announcement hopefully from our next Goverment that is attempting to realign the stamp duty rules.
    This present Goverment has lurched from one indecision to another regarding stamp Duty
    The Tories should also make sure that stamp duty is paid on a graduating scale and not as present

  29. Mike Fitzgerald: graduating scale for stamp duty what a good idea, 0% to £250,000, then gradually increasing in £10k bands, alright our stamp duty calculators would have to change, but at least it would stop the gravity pull of the £250k purchase price. Some other good ideas contained in this thread.

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