UK – The Conservative Party says it will scrap the obligatory annuity purchase at age 75 and allow young workers to contract out of the basic state pension if it is brought to power in the country’s forthcoming general election....
Speaking at a pensions lecture at accountancy and advisory company Horwath Clark Whitehill, David Willets, shadow secretary of state for social security, set out the party’s five-point vote chasing plan for retirement policy in the run up to the polls.
These he said would include the removal of the liability for basic and lower rate tax on savings, simplification of pensions regulation, the ending of compulsory annuity purchase at age 75, maintenance of stability in pensions policy, and the freedom for younger workers to contract out of the basic state pension.
Willets says the Conservatives will abolish lower and starting rate taxes on savings income and make dividends tax-free.
Only higher rate taxpayers would have to pay tax on savings.
However, he gave no indication in the speech over how he would simplify the pensions regime simpler and make it more flexible.
On annuities, Willets says that as long as the over 75s do not become dependent on means tested benefits, they should be free to continue to draw from their pension pot without buying an annuity.
Pensioners over age 75 would also get a higher increase on state benefits, which would be funded by abolishing the new deal for lone parents and savings on the social fund, he says.
Despite believing that stakeholder pensions are flawed, he would keep them to avoid further “planning blight,” as the public would feel unable to make decisions about pension provision because of uncertainty about future changes.
Furthermore, Willets argues that younger people should be given the option to have a funded pension instead of the basic state pension.
Finally, he commented that people in the UK were somewhat ignorant about pensions because companies formerly had the right to make scheme membership compulsory, adding: “you do not need to sell something that is compulsory.”