I have just spent an entertaining morning trying to figure
out HMRC’s new draft retirement income rules. What a palaver!
There are brand new options and brand new acronyms to get
our heads around – UFPLS and MPAA to name but a couple. And new rules about
what you can take and when and what proportion is tax-free. It’s a technical
geek’s paradise. You will never need to speak English again – just initials.
It’s great to have choice, but this is no picnic. The rules
aren’t simple and straightforward, and professional advisers will need to
understand the pros and cons, and importantly the tax efficiency, of each route
– and what schemes are prepared to offer – before advising their clients.
One of the biggest problems of the old (current) regime was
people didn’t shop around for an annuity, and too many settled for an inferior
rate with their current provider. But all of these wonderful new rules don’t
tackle that essential problem.
HMRC is removing the compulsory requirement to offer members
an open market option. Apparently, this is only a legislative tidy-up exercise, and I sincerely hope that when Government
re-introduces the requirement, it extends it beyond just those buying an
annuity to also apply to those plumping for a FAD or UFPLS as well. My worry is that if the
majority just settle for their new options from their current provider then
they may not be making the best decisions for their circumstances. They could
lose out on eye-watering charges, abysmal investment performance or choice, or
poor administration. Hopefully, guidance will nudge people into shopping
around, but I would like the legal OMO requirement back all the same.
Anyway, good luck in getting your heads around the new
rules. In the meantime, I’m going for a lie down in a darkened room to recover ...
