Question
Thanks for your interesting site. In your manifestos article you mention that the Conservatives will 'scrap effective compulsory annuity purchase at 75'.
Would you explain this? I am 73 receiving a State Pension how does one purchase this?Answer
Compulsory purchase annuities only apply to personal pensions and money purchase occupational pensions, not state pensions, so any changes unlikely to affect you.
When you build up a pension fund over your working life the rules currently state that you must buy an annuity (i.e. swap your pension fund for an income for life) by age 75. There is an alternative, called an ‘alternatively secured pension’ which lets you leave the fund invested and instead draw an income of between 55% and 90% of the approximate annuity you would otherwise receive (called a GAD pension). So under the alternative rules you could draw less income compared to an annuity but cannot avoid taking an income from your pension altogether.
This is unpopular with the minority that have large pensions they don’t necessarily need to use to provide income throughout retirement.
Scrapping these rules would mean you can leave your pension invested for as long as you wish, perhaps with the intention to pass on to another family member.
However, passing a pension fund to another family member in this way is currently subject to income tax of up to 70% and inheritance tax on the balance (basically, the Government doesn’t want to allow it) and it’s unclear whether and how this would change under either the Tories or LibDems.
Thanks for your interesting site. In your manifestos article you mention that the Conservatives will 'scrap effective compulsory annuity purchase at 75'.
Would you explain this? I am 73 receiving a State Pension how does one purchase this?Answer
Compulsory purchase annuities only apply to personal pensions and money purchase occupational pensions, not state pensions, so any changes unlikely to affect you.
When you build up a pension fund over your working life the rules currently state that you must buy an annuity (i.e. swap your pension fund for an income for life) by age 75. There is an alternative, called an ‘alternatively secured pension’ which lets you leave the fund invested and instead draw an income of between 55% and 90% of the approximate annuity you would otherwise receive (called a GAD pension). So under the alternative rules you could draw less income compared to an annuity but cannot avoid taking an income from your pension altogether.
This is unpopular with the minority that have large pensions they don’t necessarily need to use to provide income throughout retirement.
Scrapping these rules would mean you can leave your pension invested for as long as you wish, perhaps with the intention to pass on to another family member.
However, passing a pension fund to another family member in this way is currently subject to income tax of up to 70% and inheritance tax on the balance (basically, the Government doesn’t want to allow it) and it’s unclear whether and how this would change under either the Tories or LibDems.
Read this Q and A at http://www.candidmoney.com/questions/question184.aspx
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