Liberty SIPP

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Key Drawdown Opportunities

If your pension review date lies before the 6th April 2011 or you are over 55 and yet to take a pension then you have the opportunity to lock in 20% more pension income, every year for five years, than you will be able to after the 6th of April. This is due to the removal of Unsecured pension (USP) and Alternatively secured pension (ASP) which are being replaced by capped drawdown. Therefore members aged 55 to 75 of personal pension schemes will only be able to drawdown 100% of the government’s actuaries department rates (GAD) compared to the 120% they can take now.  They will also have to review this every 3 years instead of the current 5 year review periods.

So if you took any amount of pension before the end of the tax year you will retain the right to access the full 120% for the next five years. This could be a large increase in yearly income, for example somebody with a £200,000 fund would be able to drawdown nearly £3000 extra a year. This could be perfect for somebody around age 60 as they could benefit from the extra pension until they started receiving state benefits at 65. Therefore not feeling the large decrease in yearly income that capped drawdown would bring.

However members should also be aware that from April the 6th any crystallised assets in the pension scheme will be subject to a 55% tax charge if the member was to pass away.  Nevertheless this opportunity is one that should be thoroughly thought about and discussed as the 20% change could make a big difference to a member’s retirement. 

Mar 17, 2011