Pensions: four changes to look out for

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No doubt the new pensions minister Ros Altmann is already being bombarded by industry experts telling her just what her first move in the new role should be, but I'm sure she has her own ideas.

Altmann has fought tirelessly for a better deal for pensioners and savers for many years and has had a huge impact on pension reforms in recent years, including charge caps on workplace pensions, pension transfers and ending discrimination against older people.

However, despite the huge changes we've seen to pensions under the last government there is no doubt Altmann will have her own plans.

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Charge cap extension

The 0.75% cap on workplace pension charges that was introduced by the old pensions minister Steve Webb could be extended to include all pension and retirement products. Altmann has always been a fierce critic of rip-off products and an opponent of many insurance companies so it wouldn't come as a surprise to see the screws tightened and their margins shrink.

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State pension changes

Altmann was outspoken when Webb announced he was introducing a flat-rate state pension. She was concerned about the thousands of women retiring after April 2016 who would miss out because they had not paid enough national insurance and didn't have enough time to do so.
For many women in their 50s and 60s the situation seems doubly unfair as they have seen their pension age increased twice. Could we see some sort of transitional arrangement agreed for women who fall short of receiving the full flat-rate pensions?
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Annuities for sale

Earlier this year Webb announced that he would be happy for retirees who have already bought their annuities to trade them in for cash as part of an extension of pension freedom.
Altmann cheered this news; while she is not a critic of annuities she has been vitriolic about the way in which they were sold in the past and the fact that retirees were not provided with the best deal.

After the initial announcement by Webb news of an annuity market quickly ground to a halt, possibly because there is no market for them as yet. However, Altmann could be one to retrieve this idea from the long grass and actually make it work.

Education

While Altmann believes everything should be done to protect consumers, she does acknowledge that people need to understand financial products and services better if they are going to make the most of their money.

While Pension Wise has been rolled out for older people close to retirement to teach them about their solutions on offer for funding their retirement, Altmann has in the past called for finance to be included on the national curriculum.

So, say hello to your new pensions minister, I'm sure she'll be just as vocal and revolutionary as her predecessor.

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Pensions: four changes to look out for

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.

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