Rules for New and Existing Pensioners

haddeng

I'm writing this question on behalf of my father.

He's a pensioner, born Oct 3 1941 and retired Oct 2006.

He's receiving the State Pension, but also has a private occupational pension via Standard Life from which he took 25% in Oct 2006.

Since then he's been receiving monthly payments out of the private pension fund.

In April 2016 the then Chancellor of the Exchequer George Osborne said that people retiring from April 2016 could take their full pension pot if they wanted to. He also said 12 months later he would put a plan in place to let the existing pensioners take the remainder of their pension pot in full too.

However, he was unable to implement that plan because he was removed from his job when Theresa May took over.

My father's question is, is it fair that there is one rule for people retiring now and another for existing pensioners? And is anything being done to address this?

Any advice would be much appreciated.

JoeCrystal

To clarify, is the monthly payments out of private pension fund is an annuity? If so, then 75% of the fund is all used up to buy the annuity. There is no more money in the fund anymore.

There was an idea floated by the government that pensioners may be able to sell their annuity, but it got shot down pretty quickly.

As a matter of fairness, one has to work with the rules and laws of the time. It is unfair for your father to get State Pension at 65 while I am going to get my at 68, it is unfair that the people back in the 80s and 90s got excellent GARs percentage while the annuity at the moment is dire. Just saying.:)

As far as I can see, the options are still available for your father if he still got any DC pension funds?

drumtochty

[FONT=&quot]It was hoped that companies would bid to purchase these money purchase pension payments off pensioners and the pensioner would receive a lump sum and the companies would take the long term income in exchange.[/FONT]

[FONT=&quot]The Chancellor never ever was going to put government money in there to buy the pension off people and then take the long term earnings. He was only going to allow others to bid for these people’s pensions.[/FONT]

[FONT=&quot]The Treasury then consulted with the finance industry and they found out that the finance industry were not interested in creating such a market as their costs were such that the pensioners would not receive sufficient funds to make the transaction worthwhile to them.[/FONT]

[FONT=&quot]The idea was put into the “good ideas bucket” where a lot of things like that end up, just next to the plans for the Sinclair C5.[/FONT]

[FONT=&quot]On the other hand, there is nothing stopping the original poster purchasing the relatives pension off them and the seller setting up a direct debit to the original posters bank account to move the income on a monthly basis.[/FONT]

[FONT=&quot]The unfairness if the original poster’s relative thinks this, is not on the government’s side but in the finance industry not considering such a scheme a profitable venture.[/FONT]

Silvertabby

This was an ill thought out idea that was quite rightly shot down in flames before it could do any actual damage.

The proposal was that investment companies would 'buy' the annuity in return for receipt of the annuity payments for the rest of the (ex) pensioners life. Then it was realised that these companies expected to make a profit, and so would only be interested in buying annuitues from healthy pensioners who should have many payment years ahead of them but - to be on the safe side - the purchasers would still cover their sixes by paying the minimum possible purchase price.

Unfortunately, many of those who had been excited at the prospect of selling their annuities, got hold of the wrong end of the stick and thus believed that they had been diddled out of 'their' money.

A neighbour 'assured' me that he would get back his total pension 'pot' less pension already paid.

A poster on another finance board was distraught at the cancellation of the plan because, sadly, he had been given just a few months to live and wanted to sell his annuity so he could leave £kkks to his family. In reality, he would never have found a buyer.

xylophone

He's receiving the State Pension, but also has a private occupational pension via Standard Life from which he took 25% in Oct 2006.

Since then he's been receiving monthly payments out of the private pension fund.

Do you mean that he bought an annuity?

Or is he in drawdown?

Brynsam

haddeng wrote: »

My father's question is, is it fair that there is one rule for people retiring now and another for existing pensioners? And is anything being done to address this?

If your father bought an annuity in 2006 he would have got a better rate than someone retiring today. Would he be happy to be disadvantaged by having that retrospectively reduced?

SonOf

In April 2016 the then Chancellor of the Exchequer George Osborne said that people retiring from April 2016 could take their full pension pot if they wanted to.

It was 2015.

However, he was unable to implement that plan because he was removed from his job when Theresa May took over.

That is not why it wasn't implemented.

My father's question is, is it fair that there is one rule for people retiring now and another for existing pensioners? And is anything being done to address this?

Yes it is fair. After a consultation, it was found that it was a truly awful idea. In reality, anybody that knows anything about pensions would was saying that the minute Osborne suggested it.

It wouldnt have led to a return of the pension fund. It would have led to companies estimating your life expectancy and paying around 60% of that amount that would likely have been paid out over the remaining term to the estimated death date. If you were in poor health, it would have paid a lot less. It would also be subject to tax at your highest appropriate rate. So, it was canned

Drawdown existed in 2006 when your father bought his annuity. So, if he wanted an alternative option, he could have chosen drawdown then. he didn't. However, the annuity rate he got would be higher than the annuity rates people get today. So, is it fair that your father got a higher rate of income than those retiring today?

Things change. Its not fair or unfair. Its just life.