Greater choice is ideal for the annuitant
As this article from Hargreaves Lansdown suggests, the range of options for annuitants is now better than ever but it’s still important to explore these choices carefully in order to find the best one to suit you.
“Genuine pension investor choice has just become better as the long-standing compulsion to buy an annuity by age 75 is being scrapped, as announced in the recent emergency Budget by the new coalition government. The plan is to abolish annuity deadlines permanently in the new tax year (April 2011). This means investors can potentially take a fresh look at pensions knowing they won’t be forced into buying an annuity.
One word of caution, however. It’s still essential to claim your tax free cash sum by your 75th birthday – otherwise you’ll simply forfeit your right to it.
I envisage income drawdown becoming an even more popular home for pension funds for those investors affected by this change who are happy with the high risks involved. Income drawdown allows you to retain ownership of your pension savings whilst being able to adjust the level of regular income you take from the plan. On your death you can pass the fund onto your loved ones, minus a tax charge. In practice, I think this will only be of interest to a relatively small number of investors as drawdown is more complex and is not for everyone. Most people prefer the security of a specified income for the rest of their life which an annuity affords. Unless you have a large pension fund and probably additional significant assets elsewhere, the certainty of an annuity is too compelling to ignore.
Investors who invest prudently over many years should be left with the choice as to when they can start their income. Hopefully, this will mean more investors will take responsibility for their retirement.”
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Read the full article: Pensions now offer greater choice.
