Will you still have to buy a pension annuity when you reach retirement? The crucial question is, how much pension will be deemed sufficient to prevent the individual retiree from falling back on State benefits and how big a lump sum will they need to actually provide this? Until we know and understand all this fully we won’t really know who still has to buy a pension annuity for their all important retirement income. Millions of individuals do not have a complete National Insurance record and not nearly everyone earned enough to qualify for earnings related pensions, so it’s difficult to really put a framework round this.
It is likely that under the new rules, all these individuals will be obliged to use their pension savings first to purchase a pension annuity in order that they do not qualify for any particular State benefits before they are eligible to withdraw money from their hard earned pension fund. Roughly speaking a couple will need to have an income in retirement of somewhere around £10,500 a year, roughly the level at which they are no longer eligible for Pension Credit, before the new rules will be allow them to take any money from their pension fund. What is likely, however, is that these changes will largely benefit wealthier individuals. These changes might therefore be a positive step forward, but only for a select few individuals.


