Hurray, the compulsory annuity has been retired…
The annuity is dead (ok, not exactly dead but at least no longer compulsory) and as our stalwart pensions guru Steve Bee said in the Sunday Times: “What we choose to do with our money has nothing to do with anyone else.” Hear hear.
Annuities were a focus throughout the weekend papers with Mark King in the Observer detailing the two-track solution where an investor can choose between capped or flexible drawdown schemes. King stated that a benefit of the annuity changes is that those who still want to purchase one will be able to pick their moment to ensure they get the best possible rates. Stephen Womack also wrote in the Mail on Sunday about the changes set for annuities and the freedom that people will have when deciding what do to with their pension pot.
However, on the other side of the fence was the Sunday Express which featured a piece warning that these changes will only benefit a small proportion, most likely those with large funds. Tim Whiting at The Annuity Bureau pointed out that the vast majority will still need to access income as soon as they finish working so will not be able to defer their buying an annuity.
On this same theme Nina Montagu-Smith issued a word of caution in the Sunday Times that relatives who are left pension funds will now face a tax rate of 55% on the money left over. Another potential pitfall mentioned is a pension pot running out if an annuity has not been bought.
Still on the subject of annuities Josephine Cumbo at FT Money looked into pension savers shopping around for the best annuity rates and found (thanks to a survey by the ABI) that one third are still not exercising the open market option, potentially reducing their income by thousands of pounds. However, here at MRM we like to look on the bright side and thought that two thirds shopping around was a pretty decent figure. Well done that 67%.
A round up of overall topics is as follows:
Credit cards 2%