More than 400,000 people are expected to benefit from the radical changes announced to the drawdown regime in the Budget and which come into force today, the Financial Times reports.
One of the biggest changes is an increase to the overall size of pension savings that can be taken as a lump sum, from £18,000 to £30,000. In addition, the size of each pot that be taken as cash has risen from £2,000 to £10,000.
The minimum income requirement for unlimited ‘flexible’ drawdown has also dropped from £20,000 to £12,000, and the income limit on ‘capped’ drawdown has risen to 150 per cent of GAD rates.
Tom McPhail, head of pensions research at Hargreaves Lansdown, told the FT that while the firm has had 110,000 “customer contacts” over the past week with people wanting information on the changes, “very few” have so far cancelled their annuity contracts.
The FT quotes Barnett Waddingham’s Malcolm McLean stating that the reforms will open the door for “tens of thousands” more people to take their funds as cash, as currently two-thirds or all annuities are sold for sums of £30,000 or less.
Mr Mclean added that he expects many people will want to take advantage of the new flexibility.
Although the changes in the annuitisation rules will provide extra choice for 400,000 people this year, the impact on the wider economy is expected to be minimal.
The Office for Budget Responsibility estimated that 30 per cent of people who can benefit would choose to exercise them on the basis of their other debts and likely preference for immediate access to savings.
Proposals to be consulted on over the coming year could mean that all drawdown limits are removed in a second phase to the changes that will effectively allow all savers to take all of their pension as cash, subject only to marginal tax rates.
BofA agrees $9.5bn settlement
The Bank of America has agreed to a $9.5bn (£5.7bn) settlement with US housing regulator Federal Housing Finance Agency, marking the settlement as the largest payout to a single regulator over misleading mortgage sale practices in the run-up to the financial crisis, the Financial Times reports.
JPMorgan Chase paid $5bn (£3bn) to the FHFA, and government mortgage agencies Fannie Mae and Freddie Mac last year as part of its broader $13bn (£7.8bn) settlement with the Department of Justice and state attorneys-general.
BofA is also in settlement talks with the DoJ and state authorities in which it could pay at least $7.5bn to resolve faulty mortgage sales practices, which would bring the bank’s total payout to more than $17bn.
BofA’s former chief executive has also agreed in a separate case to a three-year ban from serving as an officer or director of a public company.
Taxpayer stake in Lloyds cut by 7%
On Tuesday the UK government sold £4.1bn of shares in Lloyds Bank, which cuts the taxpayer’s stake in the bank to 25 per cent from 32.7 per cent, The Guardian reports.