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Guide to Annuities Post-Pension Freedoms



    Currently when you retire you can take up to one-quarter of your pension fund free of tax. It is a requirement to use the remaining three quarters of your pension fund to secure an income in retirement – for most clients, most often via an annuity.

    It is possible to take the remaining three-quarters of your pension fund as cash, but today you will incur a 55 per cent tax charge on this money.

    From April 2015, the above restrictions will be removed.

    Your clients will still be able to take up to one quarter of their pension fund tax free, from the age of 55-years-old. However, you will be free to access the remaining three-quarters of your pension fund and use it as you see fit.

    The role of a financial adviser will clearly change. Planners will have to contemplate what their clients want from their retirement, what they can afford to risk and the amount of income they need to secure in order to survive for as long as they can.

    As a result of ‘death tax’ changes, there may also be a shift in how and from where an income is provided in order to pass on as much of a residual pension as possible through the generations.

    This guide will explain how this year’s Budget shook up annuities in particular, how these products are set to change in the near future and how the conversations you will have with your clients in the future will be very different from the ones you had in the past.

    Contributors to the guide were: Alistair McQueen, pensions manager at Aviva UK; Richard Williams, director of The Annuity Bureau from JLT; Mark Stopard, head of product development at Partnership; and Alan Higham, retirement director at Fidelity Worldwide Investment.

    In this guide


    Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

    1. What in Mr Higham’s opinion is the best alternative to an annuity for many?

    2. How long does Mr McQueen think it will take for the shape of the new retirement market to settle?

    3. What does Mr Stopard say will drive an increase in annuity rates for some customer demographics?

    4. How will advisers need to consider retirement income moving forward, according to Mr Stopard?

    5. What type of annuity rates have suffered since the Budget, according to Mr Williams?

    6. What does Mr Williams predict will happen to the term “annuity?”

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