Pensions: Are drawdown changes as good as they seem

15th April 2011

A lot of this may depend on the amount of money you have managed to save in your pension.

But beyond the age of 75, you now have much more freedom to decide what to do.

Until a big rule change this month you either had to buy an annuity at 75 or if you kept your pot of money and drew income past that age any money you tried to pass on was subject to huge death duties.

Many pension experts suggested that the rule had a strong bearing on the pension planning people did earlier on in life.

All this has been swept away with a new system that has one rate of tax for what you pass on set at 55 per cent, and two new strategies known as capped and flexible drawdown strategies which you can decide on from the age of 55 when you can begin accessing your pension.

Within this new framework you can of course still buy yourself an annuity, and in many cases it may be wise to do so, but if you follow certain rules you don't have to.

Under capped drawdown, the Government specifies how much income you can draw from your pension pot (an amount known as maximum GAD as it is set by the Government Actuaries Department). Under flexible drawdown if you can prove you have an income of £20,000 year, then you can withdraw whatever you want from the rest of your pot.

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