Over 75's Options

The Chancellor of the Exchequer announced in his budget speech the Government's intention to remove the requirement to purchase an annuity at age 75. This will happen in the 2011/2012 tax year following a period of consultation on the detailed arrangements.

In order to help those currently approaching the age of 75 the requirement to purchase an annuity will be put back to age 77 from 22^nd June 2010. Therefore, anyone in unsecured pension who is approaching the age of 75 can remain in USP until the new rules become clear.

Anyone who has not yet taken any benefit from a pension fund from their fund, known as crystallisation, will need to do so before their 75^th birthday and will then be able to decide if they wish to elect to purchase an annuity or follow the unsecured pension route. If they do not crystallise before age 75 then the 25% tax free cash entitlement will be lost.

The death benefit between age 75 and 77 for those in unsecured pension remains in that if the fund is returned on death there is a 35% tax charge.

Anyone who is attracted to not buying an annuity from age 75 should take highly specialist advice to ensure that the risk is properly quantified. More details at www.fairusp.co.uk

There are a small number of annuities which allow income flexibility that is offered by unsecured pension but with annuity death benefits. These can be very useful for people approaching age 75 who are concerned about the tax implications of Alternatively Secured Pension arrangements.