The introduction of personal accounts will extend the benefits of private pension saving to those on moderate to low income who do not have access to a good employer pension scheme. Together with the reforms to the state pension system which will provide a solid foundation on which to build, this is designed to encourage and support individuals in saving for their retirement.
Personal accounts will be designed to complement rather than compete with existing successful pension provision. We therefore think it is right that funds from all savings or pensions vehicles are treated in the same way, and there are no plans to treat funds associated with personal accounts differently.
The rules, which will also apply to personal accounts, allow funds held under a personal pension scheme by a customer or partner to be disregarded in the calculation of a customer's capital in income-related benefits—income support, jobseeker’s allowance (income-based) housing benefit, council tax benefit and pension credit-until the holder reaches the age of 60.
If at any age the holder receives income from the personal pension scheme, that income will be taken fully into account in the assessment of entitlement to an income-related benefit.
However, if a customer aged 60 or over fails to claim the income to which he would be entitled or fails to purchase an annuity with the funds available, the customer will be treated as possessing the amount of income forgone from the date on which it could have been expected to be claimed.
Up to 25 per cent. of any personal pension can be taken as a lump sum, and if this option is taken, that lump sum will be treated as capital for the purposes of income related support in the normal way.
Those with savings pots below £15,000 may take advantage of the trivial commutation rules and take their full savings pot as a taxable lump sum. When someone opts to do that, the lump sum will be subject to the normal capital rules within the income- related benefits.