10 Apr 2014
Savers who signed up for annuities just before the Budget are allowed to switch to one of the new options laid out in the new legislation.
In his Budget speech, Chancellor George Osborne declared that ‘no one will have to buy an annuity’ – a change which is to take place from 2015.
Savers who had taken a tax-free lump sum from their pension previously had to use the remainder to buy an annuity within six months. They will now have 18 months to choose from the options available in the new scheme.
A 25% lump sum is usually paid by an insurance company while they prepare an annuity payment. Many savers were unsure of their status because insurers were unprepared for the possibility that contracts could be cancelled after the lump sum payment.
Huw Evans, director of policy at the Association of British Insurers, said: ‘This guidance is pragmatic and realistic and will assist customers and providers to take the right decision’.