Will expat consumers benefit financially from UK pension reform

Published:  17 Jul at 6 PM
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Now that the initial shock of the UK’s March budget pension reform announcement has faded, it’s time to evaluate the reasons behind it and the real-time financial benefits to retirees.

Analysts are suggesting that the innovative policy wasn’t motivated purely by the wish to give pensioners more power over their savings. The behind-the-scenes reality, they say, is that the government has been locked in years of wrangling with product providers over the high charges and low performances of the then compulsory annuities.

In fact, the long-term costs of annuities creamed off the Treasury’s tax-relieved financial incentives for savers, and poor performance rates ate further into retirees’ capital. When product providers refused to adjust their rates and improve the performance of their products, the government simply pulled the plug by effectively destroying annuities as a pension option.

Left without an interlinked menu of alternatives, British retirement savers are now presented with a hotchpotch of legalities which solve the politics of the issue rather than benefiting those looking for a fair deal and a comfortable retirement. In addition, no solutions have yet been found to the problem of providing free or affordable independent advice to less than financially savvy retirees.

Pension and annuity providers both on and offshore are now fighting to cobble together innovative solutions which retain at least a proportion of the huge profits being made before the change. Bringing the issue into the open and giving savers control of their cash may be no bad thing, but the end game is that the tax payable to HMRC for easy access will hit pension pots as hard as did the greed of the product providers, leaving savers no better off.
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