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Queen’s Speech: Changes mean more financial control for pensioners, say campaigners

Queen’s Speech: Changes mean more financial control for pensioners, say campaigners

Campaigners for people on low incomes are giving their backing to pensions legislation announced in today’s Queen’s Speech. But better provision must be made for the free and impartial advice pensioners will need in order to make an informed choice of pension arrangement.

The Low Incomes Tax Reform Group (LITRG) has welcomed the Government’s proposals to introduce more flexibility into the pensions market by handing greater financial control to pensioners. However, the Group has expressed concern that the resources may not be there to provide the free and impartial advice that those retiring will need to make the most of the choices facing them.

LITRG pensions expert Paddy Millard commented on today’s announcement:

“We are pleased that many older people are being given the enhanced ability to use their accumulated savings as they see fit. The ability to receive 25% tax-free and the remaining 75% taxed at their marginal rate will liberate many with only modest pension savings from being trapped into poor annuity rates in the pension company with whom they have saved. The enhancement of the £2,000 limit on individual occupational and personal pension pots to a more realistic £10,000 will be especially welcome. Additionally, the vastly more flexible rules for drawing down pensions without necessarily taking out an annuity should force providers to be more competitive in what they are prepared to offer pension savers.

“However, it is vital that those who are deciding on their financial structure of their twilight years have access to good and impartial information about alternative pension products. The Government are offering a nominal sum of up £20 million to be invested in a ‘guidance service’ over the next two years to help older people with defined contribution pension pots make the right decisions for them. About 320,000 people retire each year with such savings, which works out at about £30 for each person over the two year period. This is clearly inadequate, given that the market rate per hour for professional pensions advice usually exceeds £150. This also begs the question of what happens after the two years are up. The Government needs to acknowledge these points and consider a sustainable investment in information services, or risk exploitation of people’s hard-earned savings by market sharks.”

 


 

Notes for editors:

 

1.       The Government’s background briefing notes on the Queen’s Speech 2014 can be accessed here.

2.       The Chancellor announced at the Budget in March that the majority of people without final salary pensions will be able to choose how much they want to withdraw from their pensions savings each year as an alternative to buying an annuity. The changes will allow 25% of the value of the fund to be taken tax-free, while the balance will be taxed at the individual’s marginal tax rates when it is withdrawn from the pension scheme. Additionally, pension scheme savings may be taken as a lump sum up to the value of £10,000 – five times more than previously.

3.       The Low Incomes Tax Reform Group (LITRG)

LITRG is an initiative of the Chartered Institute of Taxation to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

4.       The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

 

The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.


Matthew Oliver
External Relations Officer (Monday, Tuesday and Wednesday)

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Chartered Institute of Taxation
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