Financial Advisers Blog [See All Blog Entries]

Good news for those approaching retirement

Written by Anthony Villis on 13 December 2010 at 11.44am

Yes, you did read that correctly. Some good news for those of you approaching retirement.

The last three years have been the perfect storm for people trying to organise their finances in retirement. Poor investment returns during the financial crisis, annuity rates falling to all time lows and complex and restrictive legislative changes.

The good news is that the coalition government has simplified the funding regime, allowing maximum contributions of £50,000 from April 2011, irrespective of your level of income from previous years. This will allow more targeted funding towards the end of an individual's working life. Moreover, there will also be a carry forward option, allowing individuals to utilise unused relief in the previous three years.

The government has also introduced an interesting twist on income drawdown. For those individuals who have guranteed pension income in excess of £20,000 per annum (the Minumum Income Requirement), the limits of annual withdrawal will fall away. You could in theory, therefore, access your entire pension if you qualify. Anything taken from the pension in excess of the 25% tax free lump sum will be subject to income tax. 

And finally, individuals can now extend income drawdown past 75 to 77. A small change, but a good one nonetheless.

All in all the new rules afford more flexibility and control. As advisers we are delighted, it has been some time coming.  Please call us if you require additional clarification on any of these new rules.