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Pension annuity sales to be allowed

George Osborne is set to woo millions of older voters with a change in pension rules worth more than £10 billion.

Pensioners with existing annuities are expected to be given the right to cash them in under the Chancellor's final Budget of the parliament.

It would give them the same opportunity to access their retirement funds as Mr Osborne announced last year for people who had not already taken their pensions.

From next month, people will be able to cash in their pension savings when they retire rather than purchase an annuity - providing an annual income - under the existing reforms.

The Chancellor will extend the same freedoms to the five million pensioners who already have annuities from April 2016.

Mr Osborne is expected to have more cash to splash on pre-election giveaways than had been expected last year when he appears at the despatch box on Wednesday.

With just weeks to go before the election, the move is likely to be seen as an attempt to win over any wavering older voters.

Annuities have been the focus of growing controversy in recent years amid plunging rates and fears that many people are unaware that they could possibly get a better deal by shopping around rather than sticking with their existing pension provider.

Removing the restrictions on buying and selling existing annuities will allow pensioners to sell the income they receive from their policy without unwinding the original contract.

They will be free to e ither take the cash as a lump sum or place it into drawdown to use the proceeds more gradually.

The shake-up of the system, started last year, is aimed at giving pensioners more choice over their money, including enabling them to deal with financial problems such as debt and divorce, but the Government expects many people to continue to buy a annuity.

Mr Osborne is expected to remove the tax charges of up to 70% that currently hit pensioners who want to sell their annuity income to a willing buyer so they are taxed only at their marginal rate.

Shadow chancellor Ed Balls claimed Mr Osborne would give with one hand and take with the other.

In an article for the Sunday Mirror, he said: " When he delivers this week's Budget the Chancellor won't be able to run away from five years of failure and broken promises.

"Working people are worse off. Independent experts at the Institute for Fiscal Studies say that tax and benefit changes since 2010 have cost families an average of £1,127 a year.

"And new figures show some families have been hit even harder: a one earner couple with children are an average of £1,949 a year worse off.

"No last minute pre-election tax cut can make up for that. As everyone knows, this Tory Chancellor gives with one hand but takes away much more with the other hand."

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