While current volatile investment markets affect everyone particular care needs to be paid to those people rapidly approaching retirement age. Movements in the market can have a crippling effect on these savings and leave people who have carefully planned their retirement income with little hope of recouping their losses. This issue is particularly acute for those who are approaching their 75th birthday. While alternatively secured pension (ASP) is one option for those looking to stay invested in the market the punitive tax charges can put many people off. As a result many people will feel that their only option is to annuitise by their 75th birthday and run the risk of crystallising their losses.
Much has been made of the age 75 rule and whether it should be changed. There is a strong argument to suggest that as we are all living longer then the age 75 rule should be pushed back or even abolished altogether. The Conservatives have recently tabled a proposal to push the age back to 80 and it has been reported that the government is considering suspending the rule for a short while to enable people to have more time to grow their savings.
In this month's Big Question (p36-38) we canvassed industry opinion as to whether the rule should be amended and received an overwhelming yes from our panellists. While there does come a time when it is undoubtedly right for the vast majority of people to annuitise many clients often feel pressurised to make the decision earlier than they would wish. By extending the rule - even up until 80, clients and their advisers can delay making such an irrevocable decision until they have more of an idea of what their circumstances will be.
However, whether these views will be taken on board is debatable. The current government has long stood firm on the issue of annuitisation and is responsible for imposing the punitive tax charges on ASP two years ago. Their argument is that pension money should be used to provide an income in retirement in the first instance and that investors using ASP could be using it to pass funds down to later generations instead.
However, we are in extraordinary circumstances and we shall see if the government bows to calls to relax these rules to enable investors to recoup some of their losses - the pressure is building for decisive action to be taken.
Speaking at Professional Adviser's conference
Equity release panel
Speaking at PA360
TISA's Peter Smith
Shone a light on 'closet trackers'