News
26/07/2010 - Annuitising at age 75 scrapped
The Government is finally getting rid of the rules forcing pension investors to buy an annuity at 75.
It says, from April 2011, there should no longer be a deadline by which people "effectively have to annuitise".
In a consultation paper published today, it says pension investors will be able to choose how much to draw down annually from their pension fund throughout their retirement, subject to a capped limit, or whether to draw any income at all.
It proposes both capped and flexible drawdown options for private pension savers before and after age 75.
As part of the flexible option, the Government says unlimited lump sums can be withdrawn providing the minimum income requirements are met.
At WRFM we have urged caution over an uncapped drawdown option after age 75, saying some investors may find themselves unaware of their dwindling pension pot and run out of income.
The proposals will simplify the treatment of retirement savings and reduce complexity for individuals as well as for pension and annuity providers.
Furthermore they should give individuals greater flexibility to choose the retirement options that are best for them, with more choice over how they can provide a retirement income for themselves.
The Government will consult on the level of an "appropriate" annual drawdown limit for capped drawdown.
Residual funds will be taxable on death at 55% as per current income drawdown rules. Currently retirees over 75 can find themselves subject to taxes of up to 82%.
Financial secretary to the Treasury, Mark Hoban, today said "To encourage people to take greater responsibility for their financial future, including in retirement, we need to give people greater flexibility over how they use the savings they have accumulated. This consultation puts forward reforms that will replace outdated and overly complex pensions tax rules with a system that gives individuals greater freedom and choice."
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