Ian Hammond, managing director of Rowanmoor Group, says the scale of the pensions announcements in today’s (19 March) Budget, which could have massive implications for the annuities market, could not have been anticipated.
Mr Hammond said it was “unprecedented” for changes of this scale to be implemented, particularly in such short timescales, without consultation.
All pension scheme providers will have to make immediate changes to their systems to account for the immediate changes to the pension regime effective from next Thursday (27 March), which could allow pensioners to take their entire fund as cash with only marginal rate taxes on the amount above the tax-free lump sum.
The government also reduced the minimum income requirement for flexible drawdown from £20,000 to £12,000, with the industry expected to conform to the new rules also immediately.
He said: “The potential impact of the reduction in the minimum income requirement to £12,000 per annum is likely to result in many more people taking their whole pension fund early, with the consequence of an increased reliance on state benefits.
“Whilst these reforms appear be the bedrock of a new, more flexible pension system in the UK it will take some time for the industry to fully digest their impact.”
Mark Wood, chief executive of JLT Employee Benefits, said: “The Budget marked the single biggest leap forward for pensions for nearly a hundred years. This is the government’s silver bullet for the silver generation.”
Darren Philp, head of policy at The People’s Pension, said this year’s Budget was a potential game changer for UK pensions and was an important piece of the jigsaw when it comes to encouraging people to save for their retirement.
He said: ““For far too long, people have been put off saving for their retirement by the restrictive and archaic rules of what they can do with their own money when they come to retire.
“Building on the reforms to the state pension system and the introduction of auto-enrolment, the government’s reforms will really make it worthwhile for people to save for their old age.”
Adrian Walker, retirement planning manager at Skandia, part of Old Mutual Wealth, warns a quarter of annuity sales are under threat as a result of changes to single pot triviality rules.
He said: “Today’s budget announcement confirmed that consumers with pension pots of up to £10,000 are able to access their savings without having to buy an annuity. Our analysis of ABI data suggests that around 25 per cent of annuity sales are currently for pension pots of less than £10,000.”
