UK - Tax changes in the Finance Act could leave widows facing pension poverty, Standard Life warns.
It claims the changes will encourage money purchase scheme members to strip additional benefits - such as the widow’s provision - from their pension before they retire to maximise income.
Marketing technical manager John Lawson says the problem will arise in April 2006, when workers reaching retirement must be offered a choice of four income options: a lifetime annuity, a scheme pension, an unsecured income and an alternatively secured pension.
Lawson said his concern was over the choice between a lifetime annuity and scheme pension.
He pointed out that a 65-year-old man with a £50,000 retirement fund could get more than £5000 in additional tax-free cash by allowing his scheme administrator to buy a pension with no widowís provision. Lawson described the tax-free cash incentive as a “very dangerous” piece oflegislation.
He said: “Put simply, in order to get a higher pension income, you need to drop as many bells and whistles as possible.
“You will get people app-roaching retirement and the best way to maximise their pension is not to provide for their spouses. It really is quite dangerous - particularly as older women are already the poorest pensioners.
“As everyone is now moving towards DC it could have horrendous consequences 20 or 30 years down the line - it could leave women in real poverty.”
Lawson claims a simple solution would be to change the annuity assumptions from 4%or 1/25th to 5%or 1/20th when calculating tax-free cash from a scheme pension, regardless of the actual annuity rate.
For a man with a £50,000 fund, this would give a total of £12,500 - the same amount as a lifetime annuity option.
The Pensions Regulator (TPR) and Labour MP Stephen Kinnock and will listen to the experiences of steelworkers when transferring their pensions away from the British Steel Pension Scheme (BSPS) next week in Port Talbot.
Just Group has acquired a 75% stake in the holding company of Corinthian Pension Consulting in a bid to strengthen its professional defined benefit (DB) advisory services.
The Pensions Regulator (TPR) has exercised its production order power under the Proceeds of Crime Act 2002 for the very first time as part of a fraud investigation.
The ITN Limited Pension Scheme has named Trafalgar House as its administrator for an initial term of five years.