You would have needed to be on the moon to avoid all the news about the radical pension changes that have been announced over the last few months!

With further changes announced in the Autumn Statement the new pensions landscape from next April whilst ultimately far more flexible is also a lot more complex, writes Soper.

When George Osborne first announced the new pensions freedoms in the March 2014 Budget he took what many believed was an overly-extreme anti-annuity stance stating ‘’Let me be clear no one will have to buy an annuity’’ and he went on to declare that ‘’Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want’’

It could be interpreted from these two statements that the Chancellor believes that the general public should abandon the tried and tested but untrusted annuity (irrespective of health) – which is the only route to a secure retirement income – in favour of unlimited but totally unsecure income drawdown.

So, was it a surprise yesterday that deep within the Autumn Statement that new flexibilities to annuities were announced?  Well, not really. The large insurance companies who underwrite annuity plans were more than a little peeved in March that their respective annuity business fell off the cliff with some providers seeing an immediate 70% drop in its annuity business. Since then they have argued with the Treasury – with some success that when an annuitant dies, the tax treatment of the survivor’s benefits is both unfair compared with the tax-free treatment of the survivor’s benefits under a drawdown plan where the planholder dies before age 75.  The Chancellor was persuaded and yesterday abolished this tax and furthermore, this benefit will not be taxed if the annuitant dies after age 75.

But looking at the small print, new and perhaps key flexibility has been given to an annuity.  Currently, there is a complex ‘death benefit’ rule that states that annuity payments can continue for a specified period even where both the annuitant and any specified survivor die. This is called the guarantee period and up until yesterday the maximum guarantee period was 10 years. New rules now allow any length of guarantee period to be agreed at the outset of an annuity so in theory the long held view that only the insurance company can benefit if an annuitant dies early no longer holds.

Any potential extension of annuity payments normally means a cut in the starting annuity income so we will need to wait and see if the annuity providers can deliver an annuity plan that delivers both an attractive guaranteed income and a return of the unused capital.

Clearly, the new pension freedoms have given the box seat to Income Drawdown Plans but annuity plans are not quite dead and buried yet!

Keep checking into www.retireeasy.co.uk for further news and updates.