Compulsory annuitisation is such an awful phrase. Most people think it’s an awful concept too. These people include the Tories – and as of yesterday, it’s looking more likely that something might be done about it.
‘Compulsory annuitisation’ means having to buy an annuity with your pension pot. Currently, you have to do it at age 75. So if you’ve left your pension savings in the stock market until then, when you hit 75 you have to buy an annuity – an income for life, but a loss of control over the pension pot itself.
The main reason given for this rule is that the government is worried about people running their pension pots dry then falling back on the state. It doesn’t seem fair to blame it on a nanny state mentality though, as the rule has been in place for decades – and throughout the last Tory government.
But yesterday George Osborne confirmed that, if elected, the Tories would scrap having to buy an annuity at age 75 – presumably in their emergency Budget which would be within 50 days of being elected (so, if the May 6 election date is correct, probably some time in late June).
This is no surprise – both the Tories and the Lib Dems have been angling for this for a while. But they haven’t clarified whether they would scrap it altogether or just raise it to age 80 or 85. The Association of British Insurers thinks it should be 80. Hargreaves Lansdown, the financial advisers, thinks it should be ditched altogether to give people more of an incentive to save into a pension. We’ll have to wait a few more months – assuming they do even get elected – for details.
Lucy Warwick-Ching
Matthew Vincent
Alice Ross
Ellen Kelleher
Steve Lodge
Josephine Cumbo
Tanya Powley
Jonathan Eley