The age that you need to buy an annuity from your Income drawdown fund has temporarily increased the age to 77 with immediate effect. The new Government agreed this temporary rule in its emergency budget.

Kevin Stelfox, Sales Director at Retirement Solutions, said, “Having to take an annuity at age 75 has long seemed outdated. We at Retirement Solutions welcome the temporary decision by the government.”

It happened faster than many in our industry expected, but as a provider of flexible retirement solutions we’re already up and running. Until legislation is finalised, those aged up to 77 can:

• stay in income Drawdown
• keep their options open
• take an income or not

Source:  Sun Life Financial of Canada

Income drawdown allows you to keep your fund invested and not buy an annuity. You can have your tax-free cash (maximum of 25% of the fund) and from the remaining fund you can take an income if you require to a maximum of the Government Actuaries Department (GAD) rates.

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Capped drawdown is one of the new measures being looked at by the government in the pension reform.

Mark Hoban, financial secretary to the Treasury, said pensioners should be able to withdraw unlimited funds as long as they meet a minimum level of income. He said deciding what level of income would form one of the main outcomes of the consultation.

Included in the consultation will be the amount of tax payable on unused pension funds upon death. Mr Hoban said the consultation will propose a 55 per cent levy down from a maximum of 82 per cent.

Mr Hoban said:”This government is committed to fostering a new culture of saving and responsibility in the UK.

Kevin Stelfox, Sales Director at Retirement Solutions an independent financial adviser firm commented: “Income drawdown has long been seen as an alternative to annuitisation but many retirees are not prepared to expose themselves to the risk. Therefore any initiatives that the government can introduce to help pensioners manage their retirement income so that it lasts for their lifetime will be welcome by financial advisers.”

Kevin also added: “Buying an annuity is still likely to be the option chosen by most – for the guarantees it provides”

Dr Ros Altman, an independent policy adviser, estimated that only people with pension funds above £200,000 would benefit from the new measures.

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With income drawdown your pension fund remains invested and after taking any tax free cash you require up to a maximum of 25% of the fund value, you can draw an income from this fund. The income that can be taken is anything from £0 to 120% of the Government Actuaries Department (GAD) rate for your age and gender.

In its emergency Budget, the new Government announced its intention to “end the effective requirement to use a pension fund to buy an annuity by age 75, with effect from 2011-12”. Unfortunately, that is just about all it has said. It has introduced a temporary arrangement for those approaching age 75 by increasing the age by which an annuity must be purchased to 77, and has confirmed that anyone dying after 22 June and over the age of 75 will be subject to the USP death benefit rules, rather than the far more penal ASP regime. However, rather confusingly, it appears that it is still necessary to elect to take any tax-free cash by age 75.

Income Drawdown Calculator

To find out how much income you can drawdown under the GAD rules from your income drawdown plan you should use an income drawdown calculator. The maximum level of income can be quickly found by using the income drawdown calculator.

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Welcome to our new income drawdown blog.

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