Family Sipps boosted by MIR switch
Family Sipps have been given a boost after the Treasury confirmed that the minimum income level required to access flexible drawdown can be met from scheme pensions.
In December, the Treasury confirmed details of proposals which will remove the requirement to buy an annuity at 75 from April.
The reforms will allow savers to access flexible drawdown rather than annuitising their whole pension fund, provided they can demonstrate they have secure retirement income of at least £20,000. Income that will count towards the MIR includes the state pension, state second pension and scheme pensions in payment.
Before the Treasury ann-ouncement, James Hay & The IPS Partnership business development director Richard Mattison warned that the family Sipp could no longer be viable for smaller schemes if people were prevented from satisfying the MIR through a scheme pension.
Axa Winterthur head of pensions development Mike Morrison says the decision will provide the family Sipp with a “strong basis” when the new flexible drawdown regime comes into force on April 6.
He says: “It is possible to underwrite a scheme pension, which means that people with less than normal life expectancy will be getting a truer reflection of their benefits. The fact that the scheme pension is there does suggest that fam-ily Sipps will be right at the forefront of pension planning for the future.”
Mattison says: “If scheme pension had not counted towards the MIR, it would have removed one of the unique selling points of a family Sipp and reduced their popularity to the point where they could have faded from view.
“However, the opposite has happened so the popularity of family Sipps looks set to increase significantly after April 5.”