There are a number of changes coming in April 20011. Some of them are quite significant for a number of clients.
• Clients will no longer be forced to buy an annuity with their pension funds at aged 75 years. This improves the flexibility of pensions and possibly makes them more attractive for a number of clients who do not need access to their pension funds at this age.
• Clients will no longer be forced to buy an annuity with their pension funds at aged 75 years. This improves the flexibility of pensions and possibly makes them more attractive for a number of clients who do not need access to their pension funds at this age.• Clients who have been using drawdown to achieve higher incomes from their pension funds may now need to reconsider their options. As of April 2011, the maximum income permitted will be reduced by 20%. This clearly may have a big impact on some clients.
• The frequency of compulsory reviews is being moved from every 5 to 3 years. Hence, potentially increasing the risk of a reducing income over time.
• Pensions have in recent years become more flexible with regards accessing the pension fund. Triviality rules have had the impact of more older people starting plans with the objective of accumulating tax advantaged investment whilst maintaining funds below the minimum threshold (cirac18k). The new rules now permit people (with a minimal pension income of £20k per year) to access the remaining pension funds from age 75 years of age. The drawings being treated as taxable income. The latest rules mean that people can save with a higher rate tax relief of say 40% and draw benefits in full at say 20% tax.
• Death benefits on drawdown funds are at 55% but they will attract no Inheritance tax liability.
The above is based upon our current understanding of the finance Bill 2011. Individual advice should always be sought. The above information is not a complete review of the finance Bill 2011.
Suggested actions:
• If you receive an income or plan to receive an income through drawdown make sure this is reviewed in the next 3 weeks.
• If you have or are likely to have an income of over £20k per year from pensions then review your decisions about whether you should fund more into pensions.
