The government has today announced that from 6 April 2011 more individuals will be given increased flexibility in how they take their retirement income. See http://www.hm-treasury.gov.uk/d/pensions_annuitisation.pdf
People with a lifetime income of at least £20,000 a year will be able to access their additional funds as pension income. The £20,000 a year includes relevant income such as pensions from a registered pension scheme, lifetime annuities and state pensions. Alternatively people can continue to draw down their pension beyond age 75. The maximum income an individual can draw down is 100% of the equivalent annuity and reviews will have to be carried out annually once the individual reaches age 75, instead of triennially. The tax rate for all lump sum death benefits is to be set at 55%, apart from those who die before age 75 without having taken a pension, which will remain tax–free.
Kate Smith, Pensions Development Manager, says:
‘Greater flexibility is a good thing but this raft of change risks being too much too soon. The government has come up with some very good ideas, but pushing them out all at once could backfire. People will need information and advice on how these new rules affect their pension planning and a four month timetable feels very tight on top of all the other changes already in the pipeline.
‘Advisers, employers and individuals are already facing a great deal of change in the pensions market, especially around Pensions Reform and the RDR. We should take time to let these existing changes bed in and to see how people react. It seems sensible to prioritise the things we need to make the 2012 changes a success before introducing further change. On top of an already full regulatory implementation agenda, is a risky approach.’
Lifetime Allowance
As expected the government has confirmed the Lifetime Allowance for tax-relieved pension contributions will reduce from £1.8m to £1.5m from 6 April 2012. See http://www.hm-treasury.gov.uk/consult_pensionsrelief.htm
As a transitional arrangement, people with pension funds above the new Lifetime Allowance, or who believe the value of their pension pots will grow above £1.5m through investment growth without any further contributions, will be able to apply for a new personalised Lifetime Allowance of £1.8m. But to be eligible for this protection they must cease accruing benefits or making contributions to all registered pension schemes before 6 April 2012. People who wish to benefit from the new Lifetime Allowance protection must notify HMRC in a prescribed format before 5 April 2012.
Kate Smith, Pensions Development Manager, says:
‘I’m pleased to see the government has decided to extend Lifetime Allowance protection to people who may, at a future date, exceed the reduced Lifetime Allowance. It will mean that to benefit from the higher personalised Lifetime Allowance of £1.8 million, people will not be able to make any further contributions to, or build up further benefits in, a pension arrangement after 5 April 2012. However this appears to be a sensible compromise.’
Source : AEGON Press Release
