News
New Retirement Options
18-04-2011
From 6th April 2011 the requirement to draw a pension by the age of 75 has been removed. It is also possible to defer your Pension Commencement Lump Sum (PCLS) beyond age 75.
Both Unsecured Pension (USP) and Alternatively Secured Pension (ASP) have been replaced by Capped Drawdown. You can also draw your funds through a Flexible Drawdown arrangement if you meet the relevant criteria as described below.
Capped Drawdown
The amount of income you can draw from your fund is limited to a maximum annual limit prescribed by the government. This limit is 100% of the Government Actuary’s Department (GAD) basis as opposed to the 120% previously allowable under USP. There is no minimum income limit.
The limit is related to your age and long term gilt yields and is designed to ensure that your fund will provide you with an income for your foreseeable lifetime.
The maximum limit is subject to a compulsory review every three years. If investment returns are low the amount of income you can draw may reduce.
Flexible Drawdown
This is a new retirement option available to those individuals who can demonstrate a minimum level of secured income from specified sources.
To qualify you must have guaranteed pension income sufficient to meet a Minimum Income Requirement (MIR) set by the government. If you meet the minimum income requirement then you can draw as much income out of your fund as you wish without reference to the limits imposed under capped drawdown.
The minimum income requirement is set at £20,000 per annum.
Only pension income that is guaranteed and already in payment can be used to satisfy the MIR. This includes:
- Income from defined benefit schemes
- Income from pension annuities
- State Pension benefits
- Scheme Pension (excluding those from schemes with less than 20 members such as SIPP/SSAS)
Income taken under capped drawdown does not count towards the minimum income requirement and also Flexible Drawdown is not available from Protected Rights funds.
Please note that Flexible Drawdown will only be available under the Westerby products after the Finance Bill 2011 has received Royal Assent. This is expected to be in late summer 2011.
News Archive
- Annual Allowance and Carry Forward - (22/08/2011)
- Taxation of Death Benefits after 6th April 2011 - (22/08/2011)
- New Retirement Options - (22/08/2011)
- Protection from the reduced Lifetime Allowance - (22/08/2011)
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