Pensions - abolition of age 75 deadline

The Government is presently consulting with interested parties to consider changes to the rules that require you to take a pension income from your pension fund by age 75 years. This article will be of interest to you if you are approaching 75 years or if you are deciding between an annuity and an income drawdown.

The main changes are likely to be:

1. The requirement to take pension benefits by a certain age will be scrapped.

2. The rules which determine the scope of an income drawdown arrangement will be relaxed and can be extended if appropriate for the whole of retirement.

3. It is proposed that on the death of those in income drawdown, or over the age of 75 and who have not yet taken benefits, will suffer tax at approximately 55% on the fund lump sum value that is paid to their estate. (Currently if you die having commenced an income drawdown before age 75, there is a tax charge of 35%. On death in a hybrid income drawdown arrangement, called an alternatively secured pension, the combined tax charge can be as much as 82%.) Currently if you are under 75, before taking benefits, your fund can be paid to your beneficiaries without a tax charge - there is no proposal to change this.

These changes were published with the other Budget announcements on 22 June 2010.