Westminster scraps compulsory annuities
9 Dec 10
Shake-up of pensions system aims to provide greater “flexibility”
The UK Government is preparing to scrap the obligation for pensioners to purchase an annuity at age 75 – a move it claims will provide greater flexibility by allowing access to alternative vehicles for retirement income. The change was announced as part of the Finance Bill 2011. Under the current system, those who are obliged to purchase an annuity at a time when rates are low are placed at a significant ongoing financial disadvantage and are unable to pass on that portion of their wealth to family.
From next April, when the new system is expected to come into force, pensioners will be able to continue investing their pension pot, or move into an "income draw-down" arrangement. However, there will still be mechanisms to prevent individuals from withdrawing their entire pension pot and then claiming state benefits.