-- Pension Investors to get more flexibility in retirement --


Protect your money from the recent Budget tax cuts
Protect your money from the recent Budget tax cuts

DWP tackles state pensions for civil partners
DWP tackles state pensions for civil partners

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Maximising Pension Contributions with PIPs

One year annuity deferral could take 24 years to recover
One year annuity deferral could take 24 years to recover

 

Access to new flexible drawdown pensions will be restricted to people with a lifetime pension income of a minimum of £20,000 a year, the Treasury says.

Those who already have secure pension income of £20,000 a year will be able to withdraw any additional personal pension fund money, without restriction but subject to income tax.

Those with large pension funds and other sources of income are most likely to benefit from any enhanced flexibility.

The rule change is included in a package of draft clauses published today by the Treasury for inclusion in the Finance Bill 2011.

Capped drawdown pension amounts will be determined using GAD rates every three years until the end of the year the pensioner turns 75, after which the amounts will be reviewed annually.

The coalition has already removed the need to annuitise at age 75, putting in place an interim limit of age 77 for purchasing an annuity with a view to removing the limit altogether next year and allowing new forms of income drawdown.

Under today's proposals, this age 77 ceiling will be lifted entirely, allowing people with sufficient funds to continue in drawdown indefinitely without being forced to buy an annuity from a life assurance company.

The tax rate on lump sum death benefits will increase from 35% to 55%, apart from death benefits for those who die before age 75 without having taken a pension, which will remain tax free.

Inheritance tax will not typically apply to drawdown pension funds remaining under a registered pension scheme including when the individual dies before reaching age 75.

IHT anti-avoidance charges applying to registered pension schemes where the scheme member does not buy an annuity will be removed after April 2011.

IHT will still apply to all other lump sums, such as those in non-registered pension schemes.

For post retirement advice contact Credencis.

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