Want exemption from annuity requirement?

klondyke

blackanchorage wrote:

so if you don't want an annuity, don't invest in a pension.

A bit late to say that, when in our younger days, if not actually compulsory, it was definitely the "Done Thing" to start a pension as soon as possible with Government encouraging us, especially if one could get an occupational pension (and look what has happened to so many people who did what they were advised and found themselves destitute as they came up to retirement.)

Ha ha - I used to be worried that as I mainly worked on contract, I was not eligible for occupational pension, or hadn't been with company long enough to join/or had contributions returned. In the event, I have 2 very tiny annuities, plus state pension, (not full, as in those days there was no 'family responsibilities' allowance on NICs.)

However, with investments and savings over the years, Mr K and I get along quite comfortably - but he (72) has built up a pension pot (not huge in the first place and eroded in recent years)which we don't really need income from unless either or both of us need to go in a nursing home or whatever.

With hindsight, he should have taken an annuity years ago and we could have spent the money on all sorts of frivolities - but we are simply not great spenders. So we took a (wrongly) calculated risk that with so much anti-feeling against this ridiculous imposition of compulsorily receiving a further income at age 75, that things would change in time - and it looked very hopeful lately!!

Our children are self-dependent - but that is no reason for the Government or an insurance company to nick what's left, rather than giving them - or even charity - some extra. (Yes, I understand the arguments that the good who die young need to subsidise those that live well beyond 75 and that's what insurance is about (ie risk) - so why can't the Government think of something different - eg, yes charge the same amount as they would for IHT but put that money back into the insurance co's pot, (and all the other money Mr Brown has nicked.)

But the bottom line is that I will never ever see why if you die when you are 74 years and 364 days old, your pension pot will be paid out to beneficiaries - but die on your 75th birthday and it's all lost.

There is no way I would encourage my offspring to save for a pension - there is no trust left that they would ever get it.

wotsthat

The rules are quite clear, so if you don't want an annuity, don't invest in a pension.

That's quite an interesting point - if my religious beliefs prevented me from taking an annuity then I wouldn't have invested in a pension in the first place.

I don't understand why the government would want to get involved in this way - there are strict drawdown rules to ensure that people don't blow the lot. What difference does it make to them whether you leave your money to your family or to an insurance company?

cheerfulcat

I don't understand why the government would want to get involved in this way - there are strict drawdown rules to ensure that people don't blow the lot.

Because this is a socialist government; they need to control every last facet of your life ( haven't you noticed? ).

What difference does it make to them whether you leave your money to your family or to an insurance company?

It's idealogical; leaving money to your family means wealth in private hands, which is a no-no to a socialist ( this rule doesn't apply to government ministers or their friends, of course ).

EdInvestor

I too find it difficult to see the logic of the Government's policy: they say they are worried about tax avoidance, but only a few months ago they dropped the requirement to take a (taxable) income from a drawdown fund.Why? They have actually reduced control - fund checks are only 5 years now, not 3 , so it doesn't seem to me it's ideological.

It's obvious that they are concerned about a small group of tax avoiding well off people: the concern is not to make sure that people don't blow the lot and end up on benefits (and anyway the regulations stop that as mentioned).

Are they trying to support the City through the insurance companies? (Annuities are lucrative high margin products for some companies - though not for others - has there been lobbying?) Has it got something to do with supporting the gilts market? (But this was a Chancellor who reduced the public sector borrowing requirement to nil IIRC..) .

It seems to me that the simplest thing after age 75 is just to leave the drawdown rules as they are (or revert to the old ones re taking an income and triennial review) and then when the person dies after 75 the residue of the fund goes first to supply a spouse's pension and after the second death any residue goes into the estate and attracts full inheritance tax liability.

What is the need for all the complexity?Other countries don't have it.

cheerfulcat

EdInvestor wrote:

(But this was a Chancellor who reduced the public sector borrowing requirement to nil IIRC..)

Yeah, right.

What is the need for all the complexity? Other countries don't have it.

I don't think that it is needed; I think that it stems from this government's burning desire to micro manage everything to within an inch of its life. Control freakery, in other words. Look at the transcript of the debate to which I linked earlier and see what you think...

blackanchorage

There is a possibility to reduce tax if you don't take an annuity though. Normally you pay tax on your income and then your heirs pay IHT. If you can stash a lot of money into a pension fund, and this is then inherited, then only IHT is paid (the tax on income is avoided).

Of course this would be most useful to rich people, and I am quite happy for the government to make sure it isn't exploited. (I can understand others might have a different opinion.)

Regards, Roger

EdInvestor

What Ed Balls said


It seems the Government bases its belief in the desirability of annuities for most people on the fact that the average private pension pot is worth c.25k.

But that assumes that people who have such pensions only have one of them - whereas most people have a number dotted about - it's one of the more irritating things about pensions.

The figures will also be skewed downwards by the large number of small rebate-only protected rights pensions.

AFAIK there are no figures on people's total pension provision, and no figures even on individuals' total private pension provision. [This led to the ludicrous situation a few years ago where the Office of National Statistics was grossly overstating new pension provision as it was counting the life companies new business as actual new money - when in fact most of the money was old pensions being transferred from one provider to another.]

Could it be the Government may be making policy on the basis of misinterpreted information?

Paul_Herring

EdInvestor wrote:

Could it be the Government may be making policy on the basis of misinterpreted information?

That could never happen. :rotfl:

EdInvestor

okane wrote:

we have set up a petition on our website. The address is https://www.hargreaveslansdown.co.uk there will be a link up from this homepage to the petition from Friday 14 July 2006. If you feel that this is something you would like to support, then please visit our petition and pass the link on to anyone who you think would also be interested.

More than 750 signatures on the petition already, very good