Fears that people could be required to drain their pension pots before being allowed benefits have been quelled by Treasury officials who say the new system will not leave them worse off.
Concerns had been raised that the ability to access 100 per cent of pension from age 55 could exclude individuals from housing benefit, council tax benefit, tax credits and other benefits, as they would have been treated as having large sums available to spend. Housing benefit, for example, is not payable to those with £16,000 or more in savings.
But financial secretary to the Treasury David Gauke MP told the Taxation of Pensions Bill Committee that the rules were being examined and would be redrafted if necessary on the basis that individuals would be no worse off than they are under the current rules.
Currently, those aged 60 or over with occupational or personal pension schemes have their potential pension incomes taken into account for the purposes of means tested benefits, regardless of whether or not they are actually taking an income from their pension. It is expected that this approach will continue, with individuals assessed as receiving a sustainable income from the fund rather the full value of the fund, provided funds have not been withdrawn from the pension wrapper.
Gauke said: “The guidance that will be available will be designed to ensure that people are aware of the impacts, as far as social care and means testing are concerned. We do not desire people to be in a worse-off situation than they would have been previously under the old causes and consequences of pension flexibility.
Treasury senior policy adviser Sophie Dean said: “We have said that the principle is that the decision that you make on how you access your pension should not significantly affect how you are judged or measured for social care or welfare. We will make sure that, whatever the product choice you make, you are treated in a consistent way, whether that is in flexi-access or through an annuity, so that the treatment across the board is fair and consistent. We do not envisage a change to the existing rules. We are just making sure that whatever choice you make, you are treated in a fair way across the board.”