Pensions: UK to consider removing requirement to "annuitise" by age 75
Financial Secretary to HM Treasury, Mark Hoban MP, today announced the start of an 8-week consultation on removing the effective requirement to annuitise by age 75, following the announcement in the June Budget that these rules will end from April 2011.
The consultation document sets out proposals that will simplify the treatment of retirement savings and reduce complexity for individuals as well as for pension and annuity providers.
The reforms will give individuals greater flexibility to choose the retirement options that are best for them, with more choice over how they can provide a retirement income for themselves.
Mark Hoban said:
This Government is committed to fostering a new culture of saving and responsibility in the UK. To encourage people to take greater responsibility for their financial future, including in retirement, we need to give people greater flexibilty over how they use the savings they have accumulated. This consultation puts forward reforms that will replace outdated and overly complex pensions tax rules with a new system that gives individuals greater freedom and choice."
The Government welcomes views from interested parties on how the reforms can best be implemented, in particular the proposed new tax framework, the proposed safeguards against individuals prematurely exhausting savings, and how to minimise unnecessary burdens for individuals and industry.
Consultation paper: http://www.hm-treasury.gov.uk/consult_liveindex.htm
The consultation period starts on 15 July 2010 and closes on the 10 September 2010. Draft legislation for the reforms will be published in the autumn, with the final measures to apply from April 2011.
The UK has the largest annuities market in the world. 450,000 annuities were sold last year with a value of nearly £11,000 million (Association of British Insurers, 2009). Pensions saving received tax relief worth £18,900 million net in 2008/09 (HMRC).
The Department for Work and Pensions calculate that 7 million people are currently undersaving for retirement. The UK's previous government admitted that the state pension scheme would not be able to afford pensions at today's (real) level for the baby boomers as they retire.
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