The recent publication of the Finance Bill has surprisingly included plans to do away with the compulsory purchase of an annuity at age 75. An alternative type of pension has been suggested, called Alternatively Secured Income.
Alternatively Secured Income would allow people to draw money out of their pensions, without having to purchase an annuity. The income could also be drawn after the age of 75. On death after age 75, the remaining pension pot could be used to provide dependents with pensions.
Our View
There is currently a similar system in place called Pension Fund Withdrawal or Income Drawdown. But, these plans (as well as all others) make purchase of an annuity compulsory at age 75.
The new Alternatively Secured Income plans would allow a maximum and minimum income to be taken. One concern we have is that the minimum income each year would be just £1. Whilst this could be beneficial for the pensioner, it will not be beneficial for the pension company and costs to administer £1 per year will rise out of proportion.
We could see pension policy charges increase, just to cover these additional charges.