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Pension annuitisation legislation to be published Law to give greater flexibility to pension savers
(about 4 hours later)
Draft legislation to give greater flexibility to pension savers will be published by the Treasury on Thursday. Ministers are preparing to announce changes to the rules on pensions that they say will give savers more freedom.
The proposed law will, as promised in the June emergency Budget, remove the effective obligation to buy an annuity at age 75. From April, there will be no obligation to buy an annuity from an insurance company with money saved in a pension.
More flexible options will include continued investment or moving to a process called "income draw-down".More flexible options will include continued investment or moving to a process called "income draw-down".
However the new law will stop people spending all their pension savings and then falling back on the state. But it is thought that a limit will still be imposed on the amount of money a pensioner can take from their fund at any one time.
"Those with large pension funds and other sources of income which allow them to pass any [state benefits] means test are likely to benefit most from any enhanced flexibility," said George Bull of accountants Baker Tilly. The proposed law will, as promised in the June emergency Budget, remove the effective obligation to buy an annuity at age 75.
However, the new law will stop people spending all their pension savings and then falling back on the state.
"Those with large pension funds and other sources of income... are likely to benefit most from any enhanced flexibility," said George Bull of accountants Baker Tilly.
"Most contributors are still likely to opt for an annuity which will more or less provide a guaranteed income for life," he added."Most contributors are still likely to opt for an annuity which will more or less provide a guaranteed income for life," he added.
The new pension legislation will form part of the 2011 Finance Bill.The new pension legislation will form part of the 2011 Finance Bill.
"The new rules will mean that you won't need to buy an annuity from a life insurance company, you can just drain your pension savings directly instead," said annuity expert Billy Burrows."The new rules will mean that you won't need to buy an annuity from a life insurance company, you can just drain your pension savings directly instead," said annuity expert Billy Burrows.
"However the government intends to increase the tax rate from 35% to 55% on any lump sum left over to your inheritors from this pension pot when you die." "However, the government intends to increase the tax rate from 35% to 55% on any lump sum left over to your inheritors from this pension pot when you die."