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Budget 2014: pensions overhaul - annuity gamechanger but not Armageddon
by Dylan Lobo on Mar 19, 2014 at 16:32
The government's dramatic overhaul of pensions has major implications for the annuity market.
In what is the biggest overhaul of pensions since 1921, chancellor George Osborne said individuals would no longer be forced to buy an annuity on retirement.
The government also said it would cut the income required for flexible drawdown from £20,000 to £12,000.
It also said the cash limit for taking a lump sum out of the benefit has increased from £2,000 to £10,000. Additionally the total savings pot which can be taken as a lump sum will rise to £30,000.
The industry reaction to the bombshell was wide.
Key Retirement Solutions director Dean Mirfin said: 'The whole retirement saving landscape has been shaken up and the chancellor’s talk of the most far-reaching reforms since 1921 are absolutely correct.'
He added: 'He [Osborne] has fundamentally changed the way people save for retirement and how they take their income. The changes he has announced recognise that people’s lives have changed and that savers need to look at all their assets before making a decision on retirement income.'
Stephen Ford, head of investment management at Brewin Dolphin, said: 'This is a total game changer and will result in the almost immediate death of the annuity.'
Meanwhile accountancy firm EY said while the changes are good news for consumer, it does not necessarily mean Armageddon for the annuity market.
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