Watching George Osborne’s final budget the other day, many of your readers who are over 55 may be excited at the prospect of ‘selling their annuity’ and receiving a cash lump sum instead of the low rates currently being earned. How generous of the coalition to devise such a plan and, even better, people who are currently receiving an income from an annuity, because they have retired, can sell that after April 2016. However I approach things from a more cynical point of view and so, after a little research and watching a report or two on TV, I came to the conclusion that your readers do need to be very careful when looking at ‘cashing in’ their annuities.
The amount of money currently invested in annuities, in the UK, stands at some £11.9 billion. If you sell your annuity you are unlikely to receive the full value, however what you do receive will be added to your current income and tax will be charged either 20%, 40% or 45% tax on this income. Under current PAYE rules, it is possible that HMRC will continue to demand payments (which you may then reclaim in due course).
So, if you are a pensioner on a basic state pension and you cash in an annuity for £15,000 as an example, you could end up paying as much as £5000 in tax, during the year, and then reclaiming up to £3000 back.
So a generous Election promise by the coalition could end up generating a massive ‘windfall tax’ for the Government, a lot of work for HMRC and a bit of a sting in the tail for the elderly.
Don’t worry though, due to George Osborne’s continuing generosity, you would only have to drink 2 pints of beer a day to end up with a ‘free’ one in 5 months!!
UKIP’s Economic Policy, however, involves leaving the EU, reducing Foreign Aid and scrapping HS2 to give the UK £25 Billion per year to invest in the NHS, Police, Fire and Public Services and Armed Forces, without taking pensioner’s hard earned money by the back door.
John E Saxon
UKIP Parliamentary Candidate for Gainsborough