In December 2010 the UK government announced the removal of compulsory annuitisation from April 2011. This means that no longer will you have to buy an annuity by the age of 75, instead if you wish, and can afford to, you can leave your accumulated pension savings as they are.
A quick summary of the key points announced by the Treasury.
- Compulsory annuitisation at age 75 will end from April 6, 2011, when a new capped and flexible drawdown regime will come into force
- The cap on drawdown will be 100 per cent of the equivalent annuity
- The minimum income requirement for flexible drawdown will be £20,000 per year
- State pensions, defined-benefit schemes, scheme pensions and lifetime annuities will all count towards guaranteed lifetime income
- Death benefits will be subject to a 55 per cent lump sum tax charge
Here at incomedrawdown.org.uk we asked independent financial adviser, Matt Renier to comment on the key points announced by the treasury, Matt said, “I think these are very sensible proposals and will help many people have greater flexibility at retirement. Retirees that have the minimum income of £20,000 will certainly have greater flexibility in how much they can withdraw, however, they will be taxed on this income and with the highest marginal rate of tax being 50 percent this may not be as attractive as first thought”.