Pension experts: don't just push back compulsory annuitisation age

What a relief, this is excellent news and not a moment too soon.

Hopefully this will extend to parliamentary pensions too.

Oh good thats such a massive issue - Talk about focus on the big problems -

All public sector workers whether in employment, in retirement of derferred should have their pensions cut just like we have had ours cut in the private sector by stealth. If we are supposed to be this financvial mess together, then cut should be big time and cap it to 30k a year earners. And stop pensions for all those dodgy policemen and fireman who got early retirement and are now moonlighting doing gardening, decorationg and playing in bands etc etc. GREECE HERE WE COME!

Any new public sector worker = no pension offer just buy in the private sector like the reat of us.

Reasons are: Simple econmics. Private sector creates profits, pays tax on these profits which pays for public sector salaries and pensions. There are no profits from public sector so without private input there is no money. Put the horse and cart the right way around moron MPs!!!

Having encouraged people to stay in Drawdown after age 75, if they then impose a maximum tax of 40% on the death of the surviving pensioner, the tax take to the government will run into many billions instead of those funds being swallowed up in the annuity pool

The old Thatcherite adage of reduce tax and increase revenue at work!

Those who bleat about how the "private sector creates wealth/all public sector workers are hangers on" etc, should do well to remember that nurses, teachers, social workers, ambulance drivers are public sector who chose not to take their 30 pieces of silver but instead to work for the common good. They are paid crap wages in the main and their pension is deferred pay.

Or would you prefer someone who has given a lifetime of service to retire in poverty because they couldn't afford to pay more into a pension plan?

The private sector workers had decent benefits too until Thatcher dismantled it all and most of what we had has been bought by foreign companies a long while ago.

There is no compulsory annuitisation at 75. Anyone with a money purchase pension can elect for ASP.

A question for Nicholas Paler: Do they mean people won't need to draw income at 75?

If so - what will be the tax treatment on the fund on death?

I know its very early days, but the big issues are having decisions (even if only decisions that investigations will happen) made.

Let this sort of thing continue. This will mean that some hard decisions that may be unpopular, will have to be taken, but they know that they have five years to prove that the decisions are for the best of the country long-term before another vote is taken.

Great news on annuities - if it dos indeed happen

Scrapping compulsory annuitisation is one thing but what, if anything, new will the industry be allowed to offer instead? If all we're left with is Income DrawDown and all these messy, complicated and un-comparable third way retirement income products, then precious little of practical value will actually have been achieved.

Will GAD rates, for example, continue to dictate income levels, because they need to be scrapped at least as urgently as annuitisation?

And what about tax on unspent funds? That needs to be radically changed as well.

This announcement is welcome but extremely limited in its scope. It may not be one of the very biggest issues in need of attention, but it could improve significantly the lives of the next generation of pensioners.

Turning pension funds into disposable (and tax assessable) income will also have the knock-on benefit of getting the economy moving, so commentators should not underestimate the potential benefits of serious reform on this front.

Black Dog - re focusing on the big problems.

On the face of it you probably think this isn't a massive issue but by doing this it will generate millions (possibly billions) of revenue immediately. Which starts to fill the debt hole!

As at the moment when an individual retires and purchases an annuity and dies the insurance company keeps all the remaining funds and the individuals family gets nothing. My scrapping the requirement to buy an annuity then under the current rules on death there would be money payable to HMRC and money to the individuals family . So a way of raising tax revenue with out cutting jobs or raising our taxes the only loser being the insurance company.

I have lost count of the number of references to compulsory annuitisation I have come across in the last few months.

Have I missed something because I don;t recognise the compulsory purchase of annuties as being something that exists in the World I inhabit

If as a result less money goes into annuities, rates will worsen hitting those with small funds for whom drawdown is either too expensive or sophisticated!!

I appear to inhabit a diffeent world to other advisers. I had one client who was forced to buy an annuity 2 weeks before the legislation changed in April 2006, but since then I have several clients who are over 75 who have NOT bought an annuity, many on principle alone.

If as someone else has commented it is an intended plan to allow people to draw ALL their pension at age 75, less a significant income tax charge at the clients highest rate, then that could be a very clever move as I know clients who would happily suffer a 40 or even 50% tax charge now in return for being allowed to draw now.

This is a big issue for some people as many who reach that age have to watch their income drop in order to protect a spouse properly.

As to the Public Sector, then it has to be reveiwed the number of people paying for these is dropping, while at the same time retiring staff numbers are growing. That is not something you can delay, unlike the other shower, who left the tough calls the others.

Ask Frank Field what was suggested before he was kicked out!

Let's see the detail before getting too happy.

Will annuitisation be scrapped totally in case it clashes with various religious beliefs? Will the annuity providers get a bale-out because they might no longer enjoy huge windfall cash injections?

And what of the other really important issues e.g waiver of premium, proper fund management for those choosing a lifetime drawdown (assuming that will be an option), the tax scourge on death in drawdown etc etc.

And probably most importantly, the capital cost of the statutory schemes and/or the cost of permitting transfers out.

In my opinion and experience, bulk buyouts NEVER beat individually arranged transfers out, despite the associated costs e.g. the transvas and associated advice.

The devil is in the detail.

And being a cynic, I would point out that prime ministers have entirely different rates of permitted accrual to anyone else (apart from the chancellor and the speaker, who also enjoy this privilege). Therefore pensions are likely to be of great interest to the powers that now be.

Any guesses that the deputy pm will also get to enjoy the same pension perks?

Compulsory purchase annuity was effectively scrapped in 2006 with the introduction of ASP at A-day. There are very few schemes that still impose compulsory annuity purchase now that we have ASP, most good pension schemes automatically roll clients through in to ASP at age 75. The schemes that do impose annuity purchase at age 75 do so simply because they can't be bothered adopting the new rules which came in to effect at A-day and clients should look to move away from these schemes anyway.

I am very concerned that the new government is wasting money on a review to scrap something that was effectively scrapped in 2006. They should really direct the money towards a review of the unfair tax situation and income limits imposed under ASP.

You forgot to mention other sector workers like Doctors,Dentists,Police,Firemen,..Spooky that...mind you,you did say the poorly paid!

Salary deferred.......mmmm brought forward by 10 years then doing jobs other people could do is more like it.

This will benefit a minority of people who don't need all the income they can get. One unintended consequence may be that inheritance tax will eventually play a more prominent role. Like or loathe the current set-up, it is designed to avoid this, which also benefits the less well-off who may only just be caught by the inheritance tax threshold.

Good news so far. Lets now wait to see the detail.

i agree that simply putting back the age from 75 to 80 does not solve the problem. USP works well and I see no reason why it cannot continue until death, no matter at what age death occurs.

This will be simple, provide protection for the spouse, possible funds for children,gradchildren or other potential beneficiaries.

The clients then just need to understand the risks involved with USP.

For the vast majoirty of people, annuitisation will still remain the most suitable option.

Pension legislation needs to change and scrapping compulsorary annuitisation at 75 would be a huge step in the right direction. How many times will the government have to tweak things until they finally get things right. Gordon Brown moved things along somewhat with his raft of changes but he also make some big mistakes, such as scrapping the tax credit reclaim on dividends, introducing an 82% tax on Alternatively Secured Pension and the residential property in a SIPP debacle. The last regime introduced change time and time again without thinking it through sufficiently. The public need confidence and reassurance if they are to increase their pension contributions, or for many merely start a pension! Hopefully, two brains will be better than one in this new ConLib coalition and the reforms will be a success. The government needs to make pension contributions an attractive option, I just hope the pre-election promises dont disappear into the ether!

Pension legislation needs to change and scrapping compulsorary annuitisation at 75 would be a huge step in the right direction. How many times will the government have to tweak things until they finally get things right. Gordon Brown moved things along somewhat with his raft of changes but he also make some big mistakes, such as scrapping the tax credit reclaim on dividends, introducing an 82% tax on Alternatively Secured Pension and the residential property in a SIPP debacle. The last regime introduced change time and time again without thinking it through sufficiently. The public need confidence and reassurance if they are to increase their pension contributions, or for many merely start a pension! Hopefully, two brains will be better than one in this new ConLib coalition and the reforms will be a success. The government needs to make pension contributions an attractive option, I just hope the pre-election promises dont disappear into the ether!

As already stated, CPA was "effectively" scrapped in 2006 with the introduction of ASP at A-day.

However, because of the potential punitive tax charge on death (based on ideology of the previous administration) I would argue, the result was 'ineffective'. Unless you want to give all your money to charity or you are 'lucky' enough to leave behind a much younger surviving spouse/civil partner, ASP can be a pretty unattractive option.

The real debate turns on how to we tax death benefits?

To solve this thorny one, you first need to decide what it is you are trying to achieve by removing the currently effective compulsion.

If you want to raise tax and 'punish' those with the surplus cash then you go one way, if you are not driven by such ideology/need for tax then you go another way.

My view depends on what happens to taxes in general and HRT relief on pensions going forward.

But probably, I would start from the principle of 'pensions simplification' (remember me?)

and look for some sort of allignment between pre and post 75 death benefits that is fair and easy to understand.

What we don't need and can't afford is a load of publicly funded commitees coming up with 'solutions' that subsequently require an army of civil servants at HMRC to interpret and administer.

This does mean you can continue with Unsecured Income and not have to buy an annuity or move to ASP at 75 - confirmed.

If you are going to raise the minimum retirement age to more than than 75, then I guess you have to scrap compulsory securitisation of income at 75.

Having worked for 30 years for the NHS I now find that overnight everyone wants to trash my pension. Perhaps I shouldn't have done thousands of hours unpaid overtime to keep things going for the patients(1 or 2 of them just could have been private sector workers). For many years I was ridiculed by my private sector friends who have always earned significantly more than me, have received bonuses and perks. They could easily have saved/investing a huge amount of cash compared to me. Now that the economy has dived it is apparently my fault for being a public servant and I must be punished. I'm sure that in 10 years time normality will have been resumed with the public servants down the pecking order. Only by then even the pension will be poor and the incentive to work in the sector will be less. Im sure the private sector workers will then accept that they are earning too much and give up their bonuses and lifestyles by taking wage cuts and having whatever pension they have trashed so that taxes can be raised to save public services which we ALL depend upon.