The Association of British Insurers (ABI) has today published policy proposals intended to improve peoples’ options for taking retirement income from their Defined Contribution pensions.
The paper, ‘Time for Change: Seven proposals to improve DC pension benefits in retirement,’ outlines policy proposals which will remove existing restrictions and enable people to get maximum value from their pension savings. These include proposals to:
-Raise the current age requirement for buying an annuity (or Alternatively Secured Pension) from age 75 to 80.
-Encourage the development of ‘value protection annuities’ and products that provide a lifetime income guarantee.
-Address the issue of ‘stranded pots’ by harmonising rules for occupational and contract-based defined contribution pensions.
-Increase the income allowance for Alternatively Secured Pension (ASP).
-Introduce proposals to encourage married and partnered couples to consider their joint retirement income needs.
Recent moves to improve the visibility of the open market option (OMO) when buying an annuity at retirement have been positive, but retirement income planning is about much more than securing the most competitive annuity rate.
Even if annuity purchase is the most suitable retirement income option, it is essential to consider a variety of factors before making what is usually a lifelong decision with a substantial amount of money.
Planning for income in retirement is complex and requires professional independent financial advice.