Pension Swap Shop
The Government now wants to allow individuals who have already purchased an annuity to benefit from the new flexibilities.
From April 2016 the tax rules will change to allow individuals who are already receiving income from an annuity to sell the income from the annuity to a third party. This is subject to the agreement of the existing annuity provider.
The Government will be publishing a consultation paper which is designed to invite the industries views on how to ensure individuals are able to make informed decisions. They believe that for most individuals the right decision would be to hold their annuity. For others this reform will allow them the flexibility to use the value of their annuity as decide.
Legislation has yet to be drafted. With a general election coming up it is possible that a change in Government could lead to these changes being altered once again before being completed, so until the legislation is passed there will be no certainty.
The Chancellor also delivered a blow to the pensions industry in this year’s Budget by confirming a reduction in the Lifetime Allowance. The Government will reduce it from £1.25 million to £1 million from 6 April 2016 and link future increases to it from 6 April 2018 by the Consumer Price Index (CPI).
It is anticipated that the Government will set up a new protection for individuals with funds which exceed, or are likely to exceed, the reduced allowance in 2016. At this stage we do not know what they plan to call the new protection, or how it will work.