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Hornbuckle in drawdown warning over contributions

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Hornbuckle Mitchell is warning retirees that they will be unable to access their pension through flexible drawdown in the 2011/12 tax year if they make a single contribution after April 5.

The reforms, announced last December, will allow investors to draw down 100 per cent of their savings above a minimum income requirement of £20,000. Director Mary Stewart says anyone that makes contributions will be unable to draw money from their pot until the following tax year.

She says: “The small print says that flexible drawdown cannot be taken in a tax year when contributions have been made and anyone hoping to use flexible drawdown in the next tax year needs to ensure all contributions cease on or before April 5 this year. A single contribution will mean waiting another year.”

The Treasury has been praised for its simplified app-roach to the changes although providers have criticised the Government for pressing ahead with the April 2011 implementation deadline.

Burrows & Cummins partner Billy Burrows says: “Alth-ough flexible drawdown looks attractive, advisers need to be aware of the detail. When people real-ise they will be paying income tax at the marginal rates on withdrawals, they probably will not take their pension all in one go.”

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  • NB: they will still be able to take drawdown up to the usual capped level in the same tax year as the contribution, but any drawdown beyond the cap in that tax year will be an unauthorised payment.

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