UK pensions and investments provider Winterthur Life has accused the UK government of destroying consumer confidence in saving for retirement as a result of its decision to restrict the benefits of alternatively secured pensions.
<p>The UK Treasury's paper entitled 'The Annuities Market' is the root of this accusation. According to Winterthur, the government uses the 'annuities deal,' where individuals are required to turn their fund into a secure retirement income in return for tax relief, as the basis of its argument against pension fund inheritance and its justification of new restrictions on alternatively secured pensions (ASP).<br /><br />Mike Morrison, pensions strategy manager of Winterthur Life, commented that this requirement, which dates back to the 1920s, is now obsolete. He said: We are living longer often with changing circumstances, the irrevocable decision to buy an annuity may not be the best decision to make. <br /><br />Mr Morrison also questioned the restrictions that prevent the inheritance of pension schemes by future generations, commenting: Such money can be reasonably taxed and could also save future tax relief on contributions that the recipients did not need to pay.<br /><br />In the past, pension investors were required to buy an annuity with their pension fund at the age of 75, but this has become increasingly unpopular among investors. The April 2006 introduction of ASP appeared to offer an attractive alternative as it meant that, in return for a lump sum, investors could choose between receiving an income for life or drawing an income direct from the fund, with any surplus on death being passed onto heirs.<br /><br />Mr Morrison attacked the government's plans to restrict the benefit of ASP through increased tax charges, stating: The current proposals to make payments to non-dependants unauthorized payments and therefore liable to a tax charge of up to 70% (with IHT possibly up to 82%) is disproportionate and blatantly against the spirit of pension simplification. <br /><br />He continued: As ASPs were only introduced in April last year as part of the A-day changes to simplify pensions, many investors will view this u-turn highly negatively and unduly penal, and will not trust the government to retain any of the other rules that make pensions an attractive investment option.</p>