Annuity Questions

limeburner

Can someone please tell me what the definition of "retirement" is for purpose of an annuity? Once you are aged 55 to 75, can you take 25% of your pension fund tax free or must it be linked with some other action like taking an annuity?

What is meant by Income Drawdown and Alternatively Secured Pension?

EdInvestor

limeburner wrote: »

Once you are aged 55 to 75, can you take 25% of your pension fund tax free or must it be linked with some other action like taking an annuity?What is meant by Income Drawdown and Alternatively Secured Pension?

If you want to take 25% at age 55, it must be linked either with an annuity or income drawdown.

An ASP is a version of income drawdown which applies after the age of 75.

More info on these sites:
https://www.williamburrows.co.uk
https://www.annuitybureau.co.uk

limeburner

will look at both. thanks

williamburrows seems to be down or waiting to be updated.

limeburner

what I would ultimately like to do is take 25% tax free at 55 and then keep the balance invested and draw an income off it and add to the fund. however, it appears that once you take the tax free sum, the balance must be placed into income drawdown and NO further amounts can be added to the total fund. Is this correct? This relates to investments in a SIPP.

I consider myself sufficiently experienced to provide myself with an income rather than go for an annuity and then have capital left over to hand down. Maybe the government believes after 75 we go senile and so denies us a choice. very patronising! We are forced to buy an annuity (regardless of religious, moral or financial reasons).

With an Annuity or even worse ASP (government deliberately made this unattractive and tax rates up to 82%!!), it appears that either I cannot hand down capital or there is a catch. ASP is particularly unfair from reading the pension service website. Written in gobbledegook!

"The minimum that must be drawn as an income from the fund is 55% of an amount calculated by applying the funds available to a table produced by the Government Actuaries Department (GAD). The maximum is 90%. The GAD table is based on the level of single-life lifetime annuity rates for a person of the same sex and aged 75. No allowance is made in the annuity rate used for any level of annual pension increases.

These rates were introduced with effect from 6 April 2007, following a review of ASPs by the Government. For the year 6 April 2006 to 5 April 2007, the rates were 0% (minimum) and 70% (maximum). "

EdInvestor

limeburner wrote: »

however, it appears that once you take the tax free sum, the balance must be placed into income drawdown and NO further amounts can be added to the total fund. Is this correct? This relates to investments in a SIPP.

I suspect some providers have ways of doing what you want, while ringfencing the original fund - this is necessary so that your income level can be reviewed every 5 years.

Maybe the government believes after 75 we go senile and so denies us a choice. very patronising! We are forced to buy an annuity (regardless of religious, moral or financial reasons).

I think the problem actually relates to the large group of well-off people who don't use their spare pensions to pay themselves a retirement income, but instead use them as a way of getting tax relieved life assurance outside the inheritance tax net.The rules are deisgned to force these people to start drawing a taxable income .

To my mind the people that are using their drawdown in the way it is meant to be used should be allowed to continue under drawdown rules until death.The current drawdown rule under which the fund is returned to heirs minus 35% tax is perfectly fair, which ASP most certainly is not.

dunstonh

what I would ultimately like to do is take 25% tax free at 55 and then keep the balance invested and draw an income off it and add to the fund. however, it appears that once you take the tax free sum, the balance must be placed into income drawdown and NO further amounts can be added to the total fund. Is this correct? This relates to investments in a SIPP.

To do that would require a SIPP or personal pension drawdown plan. You can continue to add to the pension though. Your pension will have an uncrystallised value and a crystallised value. Think of it as two segments.

theGrinch

not sure if discussions are ongoing but there is a position that yes pensions should be used for as intended i.e. providing an income in retirement, but that on death any funds should be returned to the decease's estate. under such rules a minimum drawdown would be applicable.

this was effectively the Conservative position, but check out the various manifestoes at the next election! Its attractive to some but would need a bit more work done on it.