Flexible Drawdown and Flexible Income Drawdown
Flexible drawdown will now go ahead from April 2011, subject to a minimum income requirement of £20,000.
The will end compulsory annuitisation at age 75.
Drawdown is a way of taking income from your pension without buying an annuity.
Individuals with a ‘lifetime income’ of at least £20,000 may take unlimited withdrawals from their drawdown
funds, provided that the scheme permits it.
Sources of income which count towards the new flexible drawdown include guaranteed lifetime income are state pensions, defined benefit schemes, scheme pensions and lifetime annuities .
This option will be available for all new drawdown arrangements made on or after 6 April 2011. For drawdown arrangements started before that date, Flexible Drawdown will become available:
- If 75th birthday is after 6 April 2011 – from start of next reference period starting after that date
- If age 75 before then – from the start of the pension drawdown year in which 6 April 2011 falls, unless age 75 occurs between 22 June 2010 and 5 April 2011, in which case the changes start at the start of the next drawdown year starting on or after 6 April 2011
Source: http://www.pointonyork.co.uk
A 55 per cent tax charge will apply to lump sum death benefits. Previously the tax on crystallised funds was 35 per cent, rising to 82 per cent post age 75.
The Treasury has also confirmed that pension drawdown funds will not be subject to inheritance tax (IHT). Currently IHT applies to unused lump sums where an annuity has not been purchased by the time of death.