1. Pensions Technical Update
Finance Act 2011 – Essential reading
for SIPP and SSAS members
New pension legislation decreases maximum Who is the Open Annuity suitable for?
Income Drawdown pension and increases tax on
lump sum death benefits from 35% to 55%
We will focus upon the key areas that will have the • Individuals in Income Drawdown who want to
greatest impact upon pension policyholders: maintain the current maximum withdrawal rate
of 120% Annuity Rate
• Individuals who require flexible income levels -
Maximum income levels reduced from 120% to 50% to 120% Annuity Rate
100% GAD
• Individuals who want to protect their pension
Affecting both members in drawdown and those funds from both the 55% tax charge on death
who are likely to commence income from their and Inheritance Tax
pension within the next 5 years. E.g. member • Those with pension funds reaching £1.5m who
drawing maximum level of £50,000 pa will now haven‟t applied for enhanced protection
be restricted to maximum of £41,000 pa
Income review frequency increases to every 3
years from 5 years
What are the key benefits of the Open Annuity?
Taxation on death increases from 35% to 55%
for those under 75
• Control and choice of investments - similar to
Income Drawdown
Affecting all SIPP/SSAS members and members
of „standard‟ personal pension contracts. On • Generates higher income levels than Income
death, fund is passed to beneficiaries less a Drawdown - 120% annuity rate
55% tax charge. This is greater than the top
• Flexible income levels - between 50% & 120%
rate of Income Tax and Inheritance Tax
annuity limit
Reduction in Lifetime Allowance • No need for conventional annuity route
• Can pass remaining funds to chosen beneficiary
Affects all members who have pensions
free of tax
approaching £1.5m in value and who don‟t have
protection. Funds in excess of £1.5m will face a • On death remaining fund paid into trust - paid
tax charge of 55% upon crystallisation out free of tax
2. Pension planning can be complex.
Trust the experts.
Maintaining the Status Quo If you have any questions about anything you have
read here, please contact
A short window of opportunity is still open to those
who do not want to see a reduced income or lose Contact Richard Clarke or Jon Fisher
the majority of their fund on death. They can Chartwell Financial Services Ltd
achieve this by converting from Income Drawdown Lindley Court
to an Open Annuity. Scott Drive
Altrincham
What happens on Death? WA15 8AB
The Open Annuity will permit the fund value on 0161 929 3500
death to be paid free of tax into a trust which is info@chartwellfs.com
then able to pay out lump sums or “income” to a www.chartwellfs.com
chosen beneficiary as a debt against the trust.
Example of a £1m pension fund:
Open
SIPP/SSAS
Annuity
Maximum
Income £58,000 £70,000
Available
Taxation on
£550,000 £0
Death
How do I get more information?
Contact your Chartwell financial adviser who will
discuss the tax advantages and suitability with you
in more depth.
Chartwell Financial Services Limited is authorised and regulated by the Financial Services Authority. Registration number 189602.
Registered Office: Lindley Court, Scott Drive, Altrincham, Cheshire WA15 8AB
