the dramatic relaxation of the Drawdown rules in the 2014-15 Budgets,
large parts of the retirement planning field is likely to take
new directions or at least be reviewed.
As a number
of the specific details are as yet to be clarified it is
suggested that you contact NFA directly for a FREE
discussion of how these changes may affect your retirement
Phone: 01603 452686
below describe the main drawdown rules prior to the 2014 Budget
- Although the principles will remain the all-important
thresholds will change.
2011 Drawdown Option
for drawdown (Unsecured Pension) formally came into force on 6th
April 2011 ending the effective compulsion to buy annuities by
age 75 and abolishing Alternatively Secured Pensions (ASP). It
was however not until early 2012 that all the major pension
providers fully adopted the new rules.
The 2011 rules created two new types of Drawdown:
Flexible drawdown is a new addition to the pension arena
and enables retirees to withdraw any sum of money from their
pension pot once they retire.
However, as would be expected, there are some limitations to
this newfound freedom.
Thus, you must be over the age of 55 and have a secured
pension income of £20,000 or more per annum before
being allowed to use this option.
The secured pension income can take the form of either a pension
scheme or state pension - or a combination of both. Investment
income is not included in this figure.
Furthermore, once you move into flexible drawdown, you will no
longer be able to contribute further to a pension scheme.
This is obviously good news for those who have sizeable pension
funds as they will be allowed access to the pension money at any
time they choose. One option for these retirees would be to
purchase an annuity
to cover the required £20,000 limit and move some, or all, of
your remaining funds into flexible drawdown.
Capped Drawdown is available to everybody and allows pensioners
to draw an income from their pension fund for as long as they
like with no age restrictions.
income that can be taken has been reduced from 120% of GAD
annuity-levels (the level payable by an annuity to a single
person) to 100% of the annuity rates without any age limit.
period has also been changed from 5 to 3 years with annual
reviews put in place after the age of 75. With the old
Alternatively Secured Pension (ASP) scheme, the income available
was perpetually based on the fact the pension fund holder was
rules will use your actual age to calculate income available.
Implications for Those already In Drawdown.
Those who are already in drawdown will not be affected by the
new rules immediately though the government has implemented
transitional rules. These individuals will now be subject to the
new rules when their next review is due or whenever they elect
to transfer to a different drawdown plan.
This means you can benefit from the new regulations if you are
already in drawdown and you will be allowed remain in drawdown
beyond the age of 75. However, once the new rules take effect
from your next review, your maximum income will be reduced.
Changes to the taxation of remaining drawdown funds
sum death benefits from drawdown (before and after age 75) will
now be subject to a flat-rate 55% tax charge.