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Tuesday, 27 November, 2001, 20:02 GMT
Brown promises annuities review
pre-Budget report
The government is conducting a review of annuities
Sarah Toyne

The news that the government would be carrying out a review of annuities was long overdue, but was buried within the sub-text of the chancellor's speech.

The move was immediately welcomed by industry bodies, but like many of the announcements made on Tuesday afternoon there will be only lukewarm reaction from consumers.

Many people feel that annuities - that punitively fix your income for the whole of retirement - should be abolished entirely.

These sentiments were echoed by Angela Knight of APCIMs, a pension industry body: "The best way... is to allow pensioners as much freedom as possible to manage their retirement funds.

"This review must lead to real change," she said.

Long overdue

Another measure which could be termed "long overdue", but should please some people was his announcement on stamp duty.

Like many of the chancellor's announcements it was mooted once before - in last year's pre-Budget report.

The government has identified 2,000 deprived areas which should not incur any stamp duty on properties worth up to 150,000 from Friday 30 November.

A list and further details can be found on the Stamp Office's website (see link).

This policy, however, is a good example of a mixed message.

The government wants investment in deprived areas and to raise the living standards of poor people.

However, the same government earlier this year abolished tax relief on improvements made to rental properties - a measure announced by the same chancellor in the Spring budget of 1998.

Pensioners' progress

The move to extend this year's 200 Winter Fuel Allowance for each year of this Parliament will be welcome news to Britain's 11 million pensioners.

Age Concern, however, was less than supportive of the chancellor's plans for a Pension Credit.

Gordon Lishman, director general, said: "The Pension Credit is well-intentioned and will for the first time reward savings.

"However, it will add yet another layer of complexity to the already complicated benefits system and will result in more than a half of pensioners being on means-tested benefits.

"Older people who have paid a lifetime of contributions should be able to receive an adequate income through the basic state pension without having to resort to means-testing."

'Rounding up the figures'

The government will spend 2bn on the new pension credit, which will be introduced in April 2003.

The pension credit will guarantee minimum incomes for half of all pensioners and will not penalise people who have small occupational pensions or savings

It will mean that a single pensioner, for example, will receive at least 98 a week in April 2002 and 100 a week from 2003.

The government also said that it would guarantee a rise in the annual basic state pension of 100 for a single pensioner and 160 for a pension couples in 2003-04.

However, this would account for 1.93 a week for a single pensioner, and just under 3.10 for a couple.

Chas Roy-Chowdhury of the Association of Chartered Certified Accountants said: "This is a classic example of the chancellor rounding up the figures when it suits him. In fact, the real effect is not far off his infamous 75p increase."

Commuter wrath?

The Chancellor was fending off calls from the road protesters this time last year.

But next, he could be at the ransom of company car owners.

The government is considering whether free fuel provided by companies could be taxed according to the car's carbon dioxide emissions.

Saving graces

The chancellor resisted populist measures such as abolishing stamp duty on share purchases, increasing the inheritance tax threshold and simplifying rules on Isas (tax-free savings plans).

However, there were some collective sighs of relief for the moment at least.

Speculation that the chancellor would increase the rate of National Insurance Contributions - or the upper earnings limit at which Nics are paid - was not included.

And some groups might even do well from the budget.

Those who play the football pools, for example, could benefit because betting duty has been abolished.

And charities could benefit. The chancellor has instructed the Inland Revenue to conduct a consultation on whether people could receive tax relief on charitable donations paid through their self assessment form.

But maybe we will all be needing charity by the time that comes into effect.

Tax rises are on the horizon.

The government's pre-Budget report will be on 27 Novewmber






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