LV pledges to return funds to recent annuitants

LV has announced it will return funds to annuity clients that are within an extended cancellation period in the wake of the Budget shake-up of the at-retirement market, following questions raised by advisers.

Richard Rowney, LV life and pensions managing director said in statement that the insurer would guarantee to return funds to advised clients that can prove it is in their interest to not take out an annuity given the flexibilities that are being introduced to the market.

Mr Rowney added that the firm would double its cancellation period from 30 to 60 days. It caveated that the reversion would need to be in its opinion “in the client’s interest”.

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Among a range of sweeping changes to the way people fund their retirement, the government will consult on new rules that will mean from next year savers can take their full pension fund as cash with only a marginal rate tax on the portion above the 25 per cent tax-free lump sum.

In the intervening period, it has shaken up the drawdown regime to:

• cut the income requirement for flexible drawdown from £20,000 to £12,000;

• raise the capped drawdown limit from 120 per cent to 150 per cent;

• increase the size of a lump-sum small pot to £10,000; and

• increase the overall size of pension savings that can be taken as a lump sum, from £18,000 to £30,000.

Some have predicted the changes could reduce the size of the annuity market by two-thirds, with such speculation fuelling a panic sale in the markets that saw seven listed life firms shed a combined £4bn in value on a dramatic day of trading.

Mr Rowney said: “For those annuity clients still within their cancellation period, LV guarantees that it will return funds to ceding schemes if they have sought advice, and it is believed to be in the client’s best interest.

“LV has extended its 30 day cancellation period to 60 days in response to the Budget. Since the Chancellor’s announcement, we have had advisers contacting us in order to consider their clients’ options and we believe our extending cancellation period will give them time to reflect where necessary.”