Changes to Pensions post April 2011
The Government made a number of changes to retirement income options with effect from 6th April 2011.
The requirement to take retirement income before age 75 has been removed. Alternatively secured pensions (ASP) and unsecured pensions (USP) have been scrapped and replaced by flexible or capped drawdown.
Anyone who already has a guaranteed pension income of £20,000 a year or more (known as the Minimum Income Requirement) can take as much as they like from their pension savings, subject to income tax. This is known as flexible drawdown.
If you have less than £20,000 a year in guaranteed pension income you can leave your pension savings invested and take an income directly from them but you are limited to an amount that is roughly the same as an annuity, This is known as capped drawdown.
HM Revenue & Customs (HMRC) set a lifetime allowance which limits the amount of pension savings that can benefit from tax relief. For the current tax year (2011/2012) the lifetime allowance is £1.8 million. This is reducing to £1.5 million from 6th April 2012. This applies to all your pension benefits from all of your pension schemes. When you retire HMRC will check that your benefits are within the lifetime allowance.
Protected rights are due to be scrapped from 6th April 2012. Protected rights arise from contributions made by the Department for Work and Pensions (DWP) into your pension fund instead of the State Second Pension (S2P). Currently, if you are married, you are required to purchase a joint life pension with a 50% spouse’s pension from these benefits. This requirement will be removed from 6th April 2012.
The European Court of Justice has ruled that it is illegal for annuity providers to offer different annuity rates to men and women because of their gender. All annuity providers have until 21st December 2012 to implement unisex annuity rates. None of the annuity providers have announced when or how they intend to implement this.
