With George Osborne’s recent announcement in the budget, there has been much speculation that it will spell the end of annuities. There’s no doubt that they will still be around in the future but the market will shrink considerably.
For a few individuals, annuities will still be the most suitable option when planning for their retirement. For anyone approaching or planning for retirement, whether an annuity is right or not, it opens the door to many other possibilities that need careful consideration. The change announced in the budget, although potentially daunting for some, provides a great deal of choice.
David Hardman, director at Ludlow said: “It’s about understanding and finding out what’s right for you. We can now move away from the idea that we all have to opt for annuities. Let’s not forget that annuities weren’t ever the only option. Individuals always had the choice to pursue other solutions for their retirement. What the budget has done is expose this fact and create significantly more choice for us all.
“When the chancellor’s plans were first announced, everybody immediately asked the question about annuities. However, we need to be thinking beyond that. Yes, with the inevitable decline in annuities there will be an increase in other products – in choice. Yet by speculating about new products we’re only considering the options for accessing our funds, and not on how we accumulate these funds before getting to this stage.
“I expect that this is where we will see the changes that really affect individuals. At present, pensions provide one of the most tax effective vehicles for individuals to save, especially if they are higher rate tax payers. The tax breaks that these individuals currently receive on their pension contributions could well change – and this would be a real shake-up.
“What we can deduce from the recent changes is that the need for sound and tailored financial advice has never been more relevant. Not only for accessing your pension fund, but for the development and growth of your pension pot before you begin to enjoy accessing it.”