HELP! -Changes to the compulsory annuity purchase.

NGC48143

The following is listed as the new regs regarding annuity purchase..... I have a query regarding this, perhaps someone can help. My query is listed after the following.............


The Government today confirmed plans to scrap rules forcing everyone to use pension savings to buy an annuity by age 75.
But pensioners will need to have a pension income worth at least £20,000 a year to take advantage of the greater flexibility, according to details within draft legislation of the 2011 Finance Bill The minimum income requirement has been introduced as a safety net to prevent people from using up all of their retirement savings too soon and becoming a burden on the State.
Anyone with £20,000 or more pension income per year will be able to draw money from their pension pot, known as income draw down. Anyone who has less will have the amount they can draw capped.
The Association of British Insurers (ABI) stresses annuities are still crucial in offering a guaranteed pension income in retirement to those with smaller pension pots.
When picking one, it is vital you don't automatically choose the plan offered by your pension provider. Instead, search the market as better deals may be available that could boost your income by tens of thousands of pounds over your lifetime.

In my case (I am 64 and retired) and my current pension income exceeds the £20,000 listed above as being the threshold. This is without the addition of the state pension when I am 65. I was TUPE'd from my company to another for the last 2 years of my working life and join the new company pension scheme. This plan is now worth c.£19,500 and I'd like to take advantage of the change in the law and take the entire £19,500 as a lump sum (25% of this being tax free of course. However the company running this scheme (Aegon Edinburgh) have stated that the plan I have (a normal contributory scheme) is not eligible for this option and I can only take 25% as a lump sum. Anyone have any knowledge of this area??? Thanks, Norm

dunstonh

However the company running this scheme (Aegon Edinburgh) have stated that the plan I have (a normal contributory scheme) is not eligible for this option and I can only take 25% as a lump sum.

That is quite normal. Legacy plans, stakeholder pensions and some personal pensions won't offer the option. That doesnt stop you using it though. You need to transfer it into a plan that does allow or will allow it (as many providers are not yet in a position to offer it but will do - it was a late change that they havent been able to implement yet).

jamesd

Hargreaves Lansdown have said that they plan to offer that option as soon as it's available, best to give them a call to check on progress. They won't be the only ones, just one I happen to know about.

Loughton_Monkey

This is nothing much to worry about.

You would probably have had to transfer the pension from Aegon anyway, if their annuity rate was not as good as others. So simply transfer it to someone who does 'Flexible Drawdown'.

I guess several providers will emerge, but they need time to sort it all out. Be prepared, perhaps, for 'fees'. Someone like HL are not going to open up a SIPP, accept your £20K, pay you £5K tax free. Then pay you the other £15K at basic rate tax in a lump sum, and close the SIPP for nothing!

I'm guessing that you probably don't need the cash just yet? If not, why not consider leaving it in the SIPP for a while to grow? Draw it out a few years later when existing cash resources are becoming depleted?

NGC48143

To: DUNSTONH, JAMESD & LOUGHTON MONKEY,

Many thanks for your replies that clarifies the situation nicely and I think I'll take the advice of 'Loughton Monkey' (must get myself a 'name') and leave the cash where it is to hopefully grow.

Cheers Norm