The UK’s Annuity Market
New legislation being passed by the government will remove the compulsory age deadline of 75 for those who are looking to buy an annuity with their pension. In 2011 the government are introducing a new ruling that will completely remove the deadline so that pensioners can wait for annuity rates to rise before securing their income.
A number of pensioners and investment advisers are outraged with the current system which can further punish those with larger pension pots by subjecting them to a low income if annuity rates are particularly low due to market forces. One of most controversial policies under current legislation is the fact that if pensioners die before their annuity is fully paid the remaining amount is usually paid to the insurance company.
New government ruling will change this system dramatically and allow pensioners to shop around and wait for the highest annuity rates available before signing up to a scheme. For wealthy investors who can prove that they have a pension income of at least 20,000, made up of annuities, state pension and salary pension, the option of a draw down unlimited income is also available.
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The minimum income level is designed to protect pensioners requiring state help if they have a small pension and run out of money quickly and the proposed level is much higher than what was predicted by experts. However the government has stated that pensioners will be able to include a number of investments and pension payments in the income level which came as a surprise to many.
The new ruling will also allow a lump sum of the remaining pension to be paid to the owner’s estate if they die before their annuity is completed. The tax that the government placed on this is considerably high and shocked many investors. A 55% income tax will be applied to any money left in the pension upon death however this is an improvement on the previous system in which sometimes no money was returned.
Find out more about a pension annuity and how much income you could receive in your retirement.
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