UK Budget block on annuities spurs thousands to scrap contracts

Published:  21 Mar at 6 PM
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Following the surprise budget announcement that, from April 2015, converting a defined contribution pension to an annuity will no longer be compulsory, retirees who signed up over the last 30 days are rushing to cancel.

Experts estimate that up to 250,000 savers are stampeding to cancel their poor value pensions before the door slams shut 30 days after the signing of contracts. Annuity providers have been swamped with calls over the last two days, many thousands of which were from savers at home and abroad who'd been considering an annuity but had not yet signed up.

The majority of insurers allow the 30-day cancellation period, with one now allowing 60 days, but others are stating that those already signed up are locked in. It’s estimated that 30,000 savers who recently signed up will be able to cancel, and over 200,000 more who had started the process are also expected to withdraw their applications.

A further 400,000 due to retire before April 2015 are expected to delay taking their pensions in order to be able to withdraw the full amounts in cash. The move is also estimated to result in a drop in annuities purchased annually by Britons and expats alike from around 400,000 to 80,000, affecting the profits of specialist insurance brokers as well as international companies.

An added bonus for those who choose to draw down all their cash when they retire is that the tax on savings withdrawal is to be slashed from its present rate of 55 per cent to 20 per cent. Suggestions that retirees would be wiser to pay off their mortgages, invest in comprehensive health insurance policies or even in buy-to-let property rather than annuity products aren’t silencing Labour Party objections to the changes.

Lib-Dem and Conservative MPs are dismissing claims that worldly-unwise pensioners will splurge on luxuries as ludicrous, basing their opinions on the success of similar schemes in the USA and Australia. Retirees, they say, should be trusted to take care of their own money.
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