Chancellor George Osborne may abolish tax on annuity payments that are made to spouses after their partner has died to bring it in line with other ‘death tax’ changes, according to FTAdviser sister publication the Financial Times.
As it currently stands, a surviving partner must pay tax on the income payments they receive from a joint life annuity, which ranges from a half to a third of the original income.
According to the FT, it is thought Mr Osborne will announce in next week’s Autumn Statement that those income payments will be tax-free in future, to bring them into line with the recent ‘death tax’ changes. However, it is not clear whether this will apply to existing joint life annuities or plans bought in following the reforms.
At the end of September, the chancellor announced that pension funds paid out before or after the age of 75 will no longer be subject to the 55 per cent tax charge when transferred as a lump sum within a pension.
Beneficiaries of those who die under the age of 75 will not pay any tax on withdrawals, even if they take the fund as a single lump sum, while for those over 75, withdrawals will be taxed at marginal rate and lump sums initially at 45 per cent.
Yesterday, the Financial Conduct Authority announced it is set to launch a review of rules and requirements on at-retirement products ahead of next April.
In a consultation published on the guidance guarantee, the regulator revealed it will publish a consultation in “due course” which would, amongst other things, take into account the results of the second thematic review of annuity sales practices.
Since the Budget, sales of individual annuity policies have halved, and some specialist providers have made job cuts.
donia.o’loughlin@ft.com
