Steve Webb, pensions minister for the coalition is to look at small pension pots and the affect this has when shopping for an annuity. Using OMO can be difficult for those people with small funds as some annuity providers either don’t offer a solution or if they do, the fees involved can be disproportionate to the amount that is being transacted.
Rachel Reeves, Labour’s shadow pensions minister enquired about the matter and asked whether… ”he [Webb] will bring forward proposals to facilitate and reduce the cost of annuitising sums of less than £5,000.” In reply Mr Webb argued that… “…the government recognises some people with pots of less than £5,000 may have difficulties when it comes to annuitisation.”
He added that the government would work with other relevant government departments and agencies to see if anything could be done to improve the situation. Pensioners with a small pension fund are aided by the “trivial commutation rule” that allows those over 60 with savings under £18,000 to withdraw the whole amount in one go, 25% of which can be done tax free.