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   Changed Drawdown rules from 2014


   

     

IMPORTANT NOTICE:

 

Following 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 plans!

 

Phone: 01603 452686

 

---------------

 

The Sections 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
New rules 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

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.

 

The maximum 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.

 

The review 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 75.

 

The new 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

 

Any lump sum death benefits from drawdown (before and after age 75) will now be subject to a flat-rate 55% tax charge.

 

 

Topical Issues

 
 

I don't want to retire right

now - maybe next year, or

the year after...

But, can I afford to cut down

on my work hours already?

     find out more 
 

Is it a good idea to buy an

Annuity now or is it better

to wait?

Should it be a single or a

joint annuity?

     find out more 

 
retired couple

What is the right way to

arrange my Investments?

How much risk can I

afford to take?

How much income can I get?

     find out more 
   

 
 

 

 

 

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VISIT THE DEDICATED NFA INVESTMENT SITE

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You are always Welcome

to contact NFA for a free discussion

of your Income Drawdown arrangements

 

Phone: 01603 452686

 

 

e-mail: info@norwichpensions.co.uk

 

 

 

 

 

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