BUDGET: Age 75 rule becomes age 77 from today
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The Government has scrapped compulsory annuitisation at age 75 from today, pushing it back until age 77 until it develops permanent rules, which will come into effect next April.
A consultation on the detail of the proposal will kick-off shortly.
The Budget states: “The Government will end the existing rules that create an effective obligation to purchase an annuity by age 75 from April 2011 to enable individuals to make more flexible use of their pension savings.
“The Government will shortly launch a consultation on the detail of this change and will introduce transitional measures for those yet to secure a retirement income who will reach 75 in the meantime.”
Additional notes on the transitional measures state: “Pending implementation of the necessary changes, legislation will be introduced in Finance Bill 2010 to increase to 77 the age by which members of registered pension schemes have to buy an annuity or otherwise secure a pension income.
“This change will also apply for the purposes of inheritance tax charges that specifically apply to pension scheme members aged 75 and over.”
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Readers' comments (6)
Robin Hood | 22 Jun 2010 4:46 pm
Why can't they just make a straight decision so we and our clients can know where we stand. The original A day proposals were a sound enough compromise - 'get to age 75 and your funds can only pass to pension funds of your beneficiaries'. Helps keep more people off state support, but lets savers have some confidence their money is for their families long term benefit.
Was that not okay and fairly simple to grasp?
I know what, let's have another couple of years of consultations and uncertainty. Doh!
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Kate | 22 Jun 2010 4:59 pm
Great news for lots of people in USP!
I think consultation is a good thing. How many times when other legislation has been pushed through have we moaned that no-one has been consulted and that the implications haven't been thought through properly?
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John | 22 Jun 2010 5:14 pm
The A Day rules were tweeked almost immediately after they first came into effect, this latest change only enhances them especially with the expectation that the age 75 / 77 rule will be further pushed back, hopefully scrapped, except I believe it would be best to only allow pension benefits to be passed to others whilst remaining in a pension contract, thus increasing the amount people hold in pension funds and reducing the pension crisis. Within a couple of generations the the majority of the public would have far more healthy pensions and a better chance of having a reasonable level of income in retirement.
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David Townsend | 22 Jun 2010 5:32 pm
I agree with John - except that there seems top be an assumption that there is a partner, children or grandchildren involved.
What happens where there are more distant beneficiaries (or none)?
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Anonymous | 22 Jun 2010 6:49 pm
This should certainly make clients considering locking into a lifetime annuity in their sixties think again!
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Stuart B | 23 Jun 2010 7:47 am
I agree with John.
Let's have a simple system (!) where pension funds can cascade the generations, free of IHT and other external taxes, with the understanding that this money MUST remain in a pension fund and regardless on whether it's immediate family.
You can still leave the ability for the inheritors to take the fund as cash, but they will pay a large tax bill, which probably needs to be greater than the highest rate of income tax.
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