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Monday 19th July 2010
Pensions: Proposals to relax annuity rules
The government has outlined its plans to scrap the long-standing compulsory deadline for people buying an annuity.
Present rules state that those with a personal or company money purchase pension must buy an annuity once they hit the age of 75.
In the Budget, the government changed this age from 75 to 77, and now it has outlined plans to abolish the deadline.
An annuity is a policy that gives people a guaranteed pension income.
Anyone who has built up capital in a personal pension policy during their working life can convert it into a regular pension income for the rest of their life.
A quarter of this pension pot can be taken as a tax-free lump sum, but the rest must eventually be converted into an annuity.
Changes
The government has come under pressure from some investors who said that the deadline forces some pensioners into buying an annuity when the rates are poor.
The deadline meant people had to convert their pension pot into an income, rather than waiting for the markets to pick up and for better deals to be offered.
Some groups were also unhappy that the benefits could not be passed down to family members. If somebody dies shortly after buying their annuity, the bulk of their pension pot goes to the insurance company which provided the annuity.
Source: BBC News