On 17 July the Finance Bill 2014 received Royal Assent. This confirms that from 27 March 2014 the minimum qualifying income requirement for Flexible Drawdown is reduced from £20,000 to £12.000 per annum.
In addition the maximum capped drawdown is increased from 120% to 150% of GAD.
For those aged 60 and over:
1. Trivial commutation rules apply to any one pension fund of up to £10,000
2. Total pension funds of up to £30,000
On 21 July HM Treasury issued its response to the Consultation Document titled “Freedom and choice in pensions” which was issued in March. Click here to read it.
- No minimum income requirement for Flexible Drawdown.
- Those in Flexible Drawdown will have an annual allowance and so be able to contribute up to £10,000 per annum (currently NIL) to a registered pension scheme.
- Those in capped drawdown (subject to the maximum GAD calculation) will be “grandfathered” and retain the standard annual allowance (currently£40,000). This will be lost as soon as annual income exceeds the capped calculation.
- A review of the 55% tax charge levied on drawdown funds remaining on death. An announcement is expected in the Autumn Statement.
- Increasing minimum age to access private pensions from 55 to 57 in 2028.
- Introduce a new “Guidance Service” giving free and impartial guidance to everyone with pensions funds in excess of £30,000 (above the trivial commutation rules). The Financial Conduct Authority (FCA) will be responsible for standards, guidance and monitoring. There will be a levy imposed on certain firms regulated by the FCA to meet the costs.
- Transfers will be permitted from private sector AND funded public service defined benefit schemes to defined contribution schemes; subject to certain safeguards and the member must take advice from a professional financial adviser who is independent from the defined benefit scheme and authorised by the FCA.
- Trivial Commutation to be available on reaching the minimum age for accessing pensions of 55.
For more information, contact us.