THE last Budget before the General Election showed George Osborne knows a thing or two about pensions, and one of the things he knows is that people in receipt of them vote – in massive numbers, writes Mark Polson.
This was a Budget full of new whizz-bangs for pensioners and those approaching their third age. Most of it had been well leaked beforehand but was no less impactful as a result.
We saw a cut in the lifetime allowance – the amount you can have in a pension and still enjoy tax advantages – from £1.25 million to £1m. This caused apoplexy amongst, well, rich people mainly. It will catch some senior civil servants, including armed forces personnel, but we’re still looking at a pension of £50,000 a year, which includes rises for inflation and a spouse’s pension. And of course you can have as much as you like in a pension, just not with some of the tax advantages. With the average UK pension pot rather closer to £30,000 than £1m, this is a nice problem to have.
Most of the other changes involved taking money out of pensions rather than building them up. Probably the most controversial is the idea that once you’ve exchanged your pension pot for an annuity (a regular income), you might be able to sell that annuity on in return for cold, hard cash. This is fraught with issues; something the post-Budget details acknowledged by suggesting that annuity providers – insurance companies – were under no obligation to let clients do this. We also heard that 650,000 annuitants who receive means-tested benefits may be barred from accessing this flexibility.
This is a vote-grabber for silver surfers who hate the low rates that are a feature of annuities these days, but looks set to be oft-talked about and perhaps less oft-used.
It’s a fine line between making pensions sexier, and loading up those saving for retirement with so much change that they disengage completely.
• Mark Polson is founder of pensions consultant Lang Cat
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