http://www.hm-treasury.gov.uk/d/consult_age_75_annuity.pdf

In the Emergency Budget, the government announced that the requirement to purchase an annuity by age 75 was to be removed from April 2011. Transitional rules have been implemented to allow those individuals who reached age 75 on or after 22^nd June 2010 to effectively remain in Unsecured Pension (USP) up to age 77 years old.

Today we see the consultation paper covering the new tax rules that will need to be introduced aimed at inviting feedback from the industry. The consultation period will end on the 10^th September 2010. Legislation can then be drafted for the 2011 Budget. The new rules would then form part of the Finance Bill 2011.

Key points:

• Alternatively secured pension (ASP) will cease when these new rules come into force.
• Unused funds on death post age 75 years will be taxed at 55%. Alternatively, dependents pensions can be paid and will be subject to income tax as usual. Death benefits before age 75 will remain unchanged.
• Inheritance tax (IHT) will not apply to unused pension funds on death post age 75 years. This will be monitored to prevent abuse e.g. IHT avoidance
• The age 75 limit will be removed for the purposes of Value Protected Lump Sums, Trivial Commutation Lump Sums and Pension Commencement Lump Sums (or Tax Free Cash).
• Unsecured Pension (USP) will be available in two forms – a capped USP subject to maximum income limits per annum or a flexible USP with no cap. Flexible USP will only be available to individuals who can prove that they will not exhaust their pension savings prematurely and have to rely on the state. There is a proposed Minimum Income Requirement (MIR) test for flexible USP.
• The age 75 conditions in relation to the Lifetime Allowance test or the latest age at which tax relieved pension contributions can be made will remain unchanged.

To see the full consultation document click on the link below:
http://www.hm-treasury.gov.uk/d/consult_age_75_annuity.pdf