Providers expect govt review of RPI-linked MIR ban

The government is likely to review draft income drawdown rules forbidding the use of RPI-linked annuities for the minimum income requirement (MIR), specialist providers have said.

The current draft of the Finance Bill, which has yet to become law, says the MIR for flexible drawdown must be guaranteed for life, meaning annuities linked to RPI cannot be used in case inflation drops.

However, both AJ Bell and Hornbuckle Mitchell have said the Treasury is likely to review this stance.

"The point of the MIR is that it is the level of income that the government believes is high enough so that retirees will never need to fall back on state benefits in the future," said Lisa Webster, senior technical consultant at Hornbuckle Mitchell.

"This has been set at £20,000 for now but we expect it will change over time.

"Logically, if you have prolonged deflation you should see the government reducing the thresholds at which benefits are paid and a natural follow on would be for it to reduce the MIR too.

"A simple solution could be to link MIR to consumer prices, so it could rise or fall."

Gareth James, technical marketing manager at AJ Bell, added the government is still open to suggestions from the industry on the new rules.

"Representations about this issue have been made, and I expect there will be clarification and RPI-linked annuities will be allowed for the MIR," he said.

"The Treasury has been working to a very tight timescale and issues like this are bound to arise."