The National Association of Pension Funds (NAPF) has commented today (Wednesday) on the changes to pensions announced in the Budget 2015.
Commenting on the Chancellor’s announcement to cut the Lifetime Allowance (LTA) to £1m per annum, and index-link it from 2018, Graham Vidler, Director of External Affairs, National Association of Pension Funds, said:
"The Chancellor's commitment to index-link the Lifetime Allowance from 2018 is welcome. But the question remains, what will the LTA be in three years' time?
"Let's hope past performance is not an indication of future cuts. The LTA has been cut by £0.5m in the last three Budgets which if repeated would leave an LTA of £0.5m. This would buy an income of around £10,000 per year*."
In reference to the Chancellor’s confirmation of a consultation on how to create a secondary market in annuities, Vidler said:
“This clearly fits with this Government's agenda for pensions, but it’s unclear how savers will be protected. We welcome the full consultation as it will be essential to ensuring a fair and balanced market.
"It’s vital this does not distract us from or undermine the Freedom & Choice pension reforms due to begin in 19 working days. The Government must make sure this doesn't divert focus or resource from Pension Wise, damage the broader annuity market or slow down the development of a much-needed market in retirement solutions for those looking to make use of Freedom and Choice from next month."
A full copy of the Budget announcement can be found here.
*Calculated on a pension pot of £500,000. Assuming the individual is male, 65 years old, married, and takes their 25% tax free lump sum (£125,000), leaving a pot of £375,000 with which to buy an income, the Legal & General annuity calculator would offer an annual income of £9,780 based on an RPI-linkage, and a 50% income provision for his spouse after his death. We have assumed his wife is 65 years at the time of purchase.
Notes to editors:
The NAPF is the voice of workplace pensions in the UK. We speak for over 1,300 pension schemes that provide pensions for over 17 million people and have more than £900 billion of assets. We also have 400 members from businesses supporting the pensions sector.
We aim to help everyone get more out of their retirement savings. To do this we spread best practice among our members, challenge regulation where it adds more cost than benefit and promote policies that add value for savers.
Lucy Grubb, Head of Media and PR, NAPF, 020 7601 1726 or 07713 073023, [email protected]
Eleanor Bennett, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]