Savers with guaranteed with-profits annuities have received a boost after the Treasury increased the amount of income that will count towards the minimum income requirement for flexible drawdown.
Rules outlined by the Government in December mean that investors must be able to demonstrate they have secure pension income of £20,000 to qualify for flexible drawdown.
Under original draft legislation outlining “relevant income” for the MIR, published in March, only half of the equivalent level annuity for guaranteed with-profits pension income would have counted towards the MIR.
Last week, moneymarketing.co.uk revealed the Treasury has backtracked on plans to prevent savers using retail price index-linked annuities without a floor to meet the MIR.
An amendment to legislation put before the House of Commons last week also means investors will be able to count all guaranteed income from a with-profits annuity towards the MIR.
Standard Life head of pensions policy John Lawson says a person with a guaranteed with-profits annuity worth £1,000 a year will be able to count an extra £250 towards the MIR following the amendment.
Lawson says: “This is a marked improvement on the original proposals for people with guaranteed with-profits annuities. It looks like a concession to some of the major with-profits providers.”
Hargreaves Lansdown head of advice Danny Cox says: “This makes absolute sense. The only issue for advisers will be in identifying whether a client’s with-profits policy is backed by a clear guarantee.”