Calls for the government to reverse controversial changes to pension drawdown rules have been rejected.
Financial secretary to the Treasury Mark Hoban has declined a u-turn saying the new limits are to protect retirement savers.
He was responding to a plea from pension provider AJ Bell to reinstate the annual cash lump sum drawdown limit to 120 per cent of an equivalent annuity rate rather than staying with the current 100 per cent reduced rate.
The limits were changed in April by a Government Actuary Department review.
Hoban has snubbed AJ Bell by refusing to rethink the move and claimed another pension reform – scrapping the need for pension savers to annuitise by 75 years old – only works with the lower limit.
“The change in the drawdown withdrawal rate to a single rate of 100% of the Government Actuary’s Department rate at any age was integral to ensuring this product was suitable for use over a much longer period,” said Hoban.
Hoban went on to explain that although the rate change is affecting pension incomes, he felt market volatility, low interest rates and high inflation are also combining to lessen pension income.
“In reforming pensions we have to balance freedom, fairness and responsibility,” said Hoban.
Andy Bell, head of AJ Bell, said: “From reading the response to my letter you can understand why the government would have an aversion to changing rules that were adopted as recently as April 2011. However, it demonstrates that they are failing to appreciate the strength and depth of feeling on this matter.
“We will continue to work on building the case for change and will look to evidence the depth of feeling that exists on this subject. We have two surveys running concurrently with clients and advisers and will announce the results in the coming weeks.”
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