The Government has published proposals to scrap the requirement to purchase an annuity by age 75 from April 2011, as announced in June’s Emergency Budget.
Launching the consultation, Financial Secretary to the Treasury Mark Hoban wrote: ‘We recognise that increased flexibility over retirement age, and the increased range of assets held by the retired, means that some will want greater choice on the timing of the payment and amount of pension income.
‘However, the current inflexibility in the pensions tax rules acts as a barrier to saving for some, because people have very little choice in securing a retirement income and finding a solution that is best for them. That is why the Government has committed to ending, from April 2011, the current rules that effectively require individuals to purchase an annuity by age 75.’
The consultation will run for the eight weeks to 10 September 2010.
Why the rules are changing
Under the current rules, individuals have to take an income from their pension fund from the age of 75, whether this is through buying an annuity or by taking an income directly from their pension fund, known as an alternatively-secured pension.
This requirement has existed since 1976, when the average life expectancy of a healthy 65-year-old male was 13 years. On average, a healthy 65-year-old man can now expect to live for 21 years and a 65-year-old woman can expect to survive for another 24 years.
Which? welcomes pensions consultation
Which? believes that the age 75 rule is outdated and, in the light of increased longevity, consumers need greater flexibility. At the same time, it’s important to have a ‘minimum income requirement’ to ensure an individual does not become a burden on the State.
Which? welcomes the consultation and will be submitting its response to the new government document.
For more detail on your current retirement options, read the Which? guides Planning your retirement and Annuities explained. It’s also important to take independent financial advice when planning your retirement options – read our guide Choosing a financial adviser for details of the qualifications you should look for.
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