Press Release

Forimmediate release

Friday3 October 2003

Pension lump-sum not all itseems, says IoD

A Government plan to pay lump sums to peoplewho put off taking their state pensions until they are 70 was criticised todayby the Institute of Directors (IoD). The proposal, announced at the LabourParty Conference by Work and Pensions Secretary, Andrew Smith, could see peoplereceiving up to 30,000 if they delay claiming their state pension for fiveyears.

However, the IoD,sPensions Executive, Derek Brownlee, said:

"The proposedlump sum option for those deferring taking their basic state pension may beattractive to a small number of pensioners, but in reality we expect very fewwill find it suitable.

"Even those whocan afford to defer taking the pension may struggle to work out if it isfinancially sensible to do so. They will have to consider the impact that thelump sum would have on their entitlement to state benefits, such as the PensionCredit, and their tax position with regard to losing the benefit of theage-related personal allowance.

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"Many people whowould be able to defer taking the Basic State Pension for example, thoseworking beyond 65 may decide it is better to save their pension payments for5 years in ISAs for example, and then cash them in at 70. This means the moneycan be accessed if required. As well as ensuring that in the event of apensioner dying before 70 they would still leave something to inherit. At the momentit is not clear whether the lump sum proposed by the Government would be paidout if the Pensioner died before the date of payment. "

ends 03.10.03 No.199

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Noteto editors

TheInstitute of Directors is a non-party political independent organisation witharound 55,000 members. In addition to its wide range of business services, theIoD provides an effective voice to represent the interests of its members to governmentand key opinion-formers. It also brings the experience of business leaders tobear on the conduct of public affairs