LV has become the latest life company to respond to last week’s Budget by dropping its minimum drawdown pot size to £30,000, the new maximum that can be taken as a lump sum under trivial commutation rules.
The news follows similar moves last week by Standard Life and Aviva, who both also reduced their minimum pot size from £50,000 to offer drawdown flexibility to savers that from next year could be given the chance to cash in their entire pension fund under sweeping reforms.
Chancellor George Osborne announced that all drawdown limits and unauthorised tax charges would be removed from April 2015 subject to industry consultation, in a move many have predicted could effectively remove the market for conventional single annuities.
Ahead of these dramatic changes, from the end of this month drawdown rules have changed to allow savers to take a new higher income of 150 per cent of GAD rates, while flexible drawdown can be accessed as long as savers can prove a lower minimum income of £12,000.
LV said it would be ready to quote clients the 150 per cent capped drawdown rate from today (24 March) for fixed-term annuitants and for everyone else from Thursday (26 March).
In response to the Budget announcements the share prices of a number of life companies plummeted, and on Friday five companies announced they were temporarily suspending recent annuity purchases to give clients a chance to reconsider.
Aviva, Friends Life, Prudential and Royal London all told FTAdviser they were pausing purchase, while later in the day LV also confirmed it was doing the same.
Aegon, Legal and General and Standard Life confirmed to FTAdviser they are not suspending annuities business. Partnership also said it is also not suspending applications, but it has extended its guarantee period for recent annuitants.
