Pension savers are being conned into thinking the Government’s new plans for annuities are a good deal, according to the retirement specialists.
Compulsory annuitisation at the age of 75 is to be scrapped by the new coalition with the hope that it will allow pension savers to benefit from their investment for longer and gain a larger income. It will also allow them to be able to pass their retirement savings on to loved ones.
Current rules simply require that pensions start paying an income from the age of 75. On retirement, many individuals will use their pension fund to purchase an annuity, to give them a regular income for the remaining years of the life.
However, as the vast majority of retirees purchase an annuity well before the age of 75, usually timing it to begin with the start of their State Pension, it is likely to affect fewer than 2 per cent of retirees.
As a result Just retirement has described the Government’s plans as a ‘red herring’.
David Cooper, marketing and distribution director of Just Retirement said:"Given the Conservatives' opposition to so-called compulsory annuitisation at 75, it is likely to be abolished by the new Government. However, the "compulsion" was illusory and is only likely to affect 2% of retirees.
“We at Just Retirement welcome any Government focus on retirement income provision, especially on the provision of long term care, greater clarity on means testing and wider public education about the options facing everyone as they plan for their retirement."
The full budget will be announced on June 22, where the plans are likely to be outlined in detail.
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