‘Mad’ rules leave pensioners with pennies
This article explains how many people may have had a main pension….
But many also put cash into another pension – whether a personal plan or a company arrangement – at some point.
Typically, this is a forgotten lump sum deposit, or a small number of contributions which tally just a few thousand pounds.
As Mr Anderson discovered, government rules stipulate that unless this money is worth less than £2,000, it almost always must be converted into an income by buying an annuity (see box, right).
“These limits are totally ridiculous in today’s situation where annuity rates are so small,” Mr Anderson said. “In theory, I could buy an annuity with my £2,500 but, after paying fees and set – up charges, the income would be little more than pennies per week.”
A huge 100,700 people bought an annuity with savings of less than £10,000 in last year. More than half had a pension funds, worth less than £5,000, according to the Association of British Insurers (ABI), the insurance trade body.
This is a big but quiet scandal and needs sorting quickly particularly in the interests of the rural elderly who might find access to their legitimate savings helps them to live in countryside with a reasonable quality of life