A first step towards pension freedom? Interim measure deferring the requirement to buy an annuity to age 77. - Mazars - United Kingdom
A first step towards pension freedom? Interim measure deferring the requirement to buy an annuity to age 77.
The Government has announced that it will end the effective requirement for members of registered pension schemes to purchase an annuity by age 75 with effect from 6 April 2011.
This requirement has been subject to extensive lobbying by members of registered pension schemes who viewed annuity rates as insufficient reward for a lifetime of savings
This measure will therefore increase the scope for a new generation of pension decumulation product by life insurance companies and fund managers, but detailed rules will have to be produced in the time for 6 April 2011 following consultation.
Individuals who have already reached age 75 are not able to take advantage of the new regime, as they are now mainly locked into either:
- a purchased annuity; or
- an Alternatively Secured Pension (“ASP”) Fund which is subject to strict minimum and maximum withdrawal limits and, on death in the absence of dependence of a charity donation may trigger an unauthorised payments charge, unauthorised payments surcharge and scheme sanction charge totalling 70%, as well as IHT.
Those reaching that age between 22 June 2010 and 5 April 2011 would have been open to suffering the same fate, but an interim measure has been introduced to allow them to participate in new products. The technical way this has been achieved is to defer the age by which they are required to buy an annuity to age 77.
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