The Treasury is to set out the flexible products allowed as part of the new pension freedoms outlined in the Budget as it moves to tackle concerns over pensions “recycling”.
Ahead of a formal announcement from the Treasury expected later today, the Telegraph reports pensioners will be able to choose products that allow income to be varied in line with their needs, such as paying for long-term care.
Meanwhile The Observer reports the reforms will see annuities able to continuing paying out well after death to the family of the deceased policyholder. Income rates would depend on the length of the guarantee.
The Treasury is also set to reduce the annual allowance from £40,000 to £10,000 where people access their pensions from age 55 from next year, according to the Financial Times.
The newspaper says this measure is aimed at tackling concerns over the “recycling” of tax-free cash, where people take their lump sum and then reinvest that cash into a new pension and receive tax relief again.
Towers Watson senior consultant David Robbins told the FT: “It was always inevitable that the Government would do something in the current political environment that would limit people putting money into a pension and then taking it straight out to save tax as a result.”
Money Marketing sister title Corporate Adviser revealed in May that the Government’s flagship policy of pensions freedom created a £24bn tax loophole by opening the door to workers aged 55 and over paying less tax through salary sacrifice.