In our previous bulletin we informed you that the age-75 restrictions in tax legislation have been relaxed by the Finance Act 2011 and that there is now no specific tax requirement for a member to draw an annuity or scheme pension.
So, what do members and trustees need to consider?
From 6 April 2011, tax laws allow members with DC funds can postpone securing an income or purchasing an annuity indefinitely. There are now two income drawdown options for members to consider; ‘capped drawdown’ and ‘flexible drawdown’. Whilst both are available from the age of 55 (depending on any protected pension age), capped drawdown does not require a minimum amount of income to be drawn annually. Whereas, with flexible drawdown, members can withdraw an unlimited level of income providing they can show a minimum income level of £20,000 per year.
Whilst the new tax laws allow members to have enhanced flexibility regarding how they may take their benefits, trustees are not required to implement the changes. Trustees of DB schemes should be aware that wealthier members with substantial pension benefits may start looking to transfer their retirement benefits in order to take full advantage of the new flexibility