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August 2010

Coalition to remove annuity requirement

The coalition government has published a consultation paper on annuity reform, which sets out necessary changes to the tax rules in order to fulfil its Budget pledge to scrap the need to buy an annuity by the age of 75 from April 2011.

Under the new rules pension funds can be invested for longer, with individuals able to choose how much to withdraw each year, subject to annual limits, or whether to take out any income at all.

If an individual has met the minimum income requirements and so can prove they have enough funds not to run out and become reliant on the state, they will be able to withdraw unlimited lump sums.

The level of the cap and the minimum income requirements will be discussed during the eight-week consultation period, which ends on 10th September 2010.

Retirees will still be able to use some or all of their funds to purchase an annuity at any time. As a result of these measures, alternatively secured pensions (ASPs) will be scrapped.

Transitional measures have been introduced for those who will turn 75 before the legislation comes into force, but who have yet to secure a retirement income, which will enable them to defer their decision until the new rules are finalised.
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