Ahead of the Chancellor’s Autumn Statement, MGM Advantage’s pensions technical director Andrew Tully has highlighted three areas of the retirement income landscape he would like to see addressed this Wednesday.
Taxation on Joint Life Annuities Andrew Tully said: ‘We now expect the Chancellor to remove the tax on joint life annuities inherited when a partner dies before the age of 75. This is a fairer deal for holders of annuities, and one which comes at a relatively small cost to the Treasury.
‘The move also shows that the government recognises the important role that annuities still have to play. While new flexibilities will offer the customer more choice, many will still want the certainty and stability that comes from a guaranteed regular income and this enables them to do so without being unfairly penalised.’
Clarity on the Guidance Guarantee Andrew Tully commented: ‘The level of choice that comes with the pension freedoms next year has huge appeal, but also huge potential for poor outcomes. The uptake of guidance and advice will be important to helping people avoid the risks involved with making decisions about their retirement, such as not appreciating the tax implications of taking out lump sums of money, or under-estimating their life expectancy when planning.
‘We need a fall back – a second line of defence – to ensure that the public are aware of the options they have and where to get the support they need to make the best decisions about their retirement income. With research indicating that only 2.5% of those eligible were planning to take up the guidance guarantee, many will fall through the gap without guidance or advice. The regulator must press providers of products to take more responsibility for giving customers the information they need. We need to offer people more protection.’
Reform of Pension Tax Relief Andrew Tully said: ‘There’s been some speculation that changes might be made to pension tax relief, but should we be expecting major reform? No, probably not.
‘However, it’s important that we do all we can to make the system simpler and encourage people to save more for retirement, starting preparations earlier and thinking in the longer term.’
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