LONDON (Citywire) - Changes to the Pensions Bill 2007 have made protected rights pensions less flexible and potentially more expensive.
The changes mean that those who are married or in a civil partnership will still have to buy a 50% partner pension with their protected rights pot, after money purchase contracting-out is abolished in 2012.
As a result, these people will not be able to combine their separate pensions pots to buy one annuity, which means they will incur two annuity administration expenses and therefore a receive a lower annuity rate.
In addition, providers will not be allowed to combine protected rights and non-protected rights pension pots, which Standard Life says will make communication with members more complicated and expensive.
As this provision has been made a condition of primary legislation it can only be repealed with primary legislation in the future.
John Lawson, head of pensions policy at Standard Life, said: ‘This is a major disappointment. The opportunity to simplify money purchase pensions once and for all, now appears to be lost.
Providers and advisers will still have to explain the technical differences to customers who find pensions difficult enough without this added complexity. The Government is supposed to be following a de-regulatory agenda, but this is the complete opposite - unnecessary red tape.’
c Citywire Financial Publishers Ltd 2007