MIR speculation continues...
Posted: 06/06/2011 09:13:05 by
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Since the Government’s new pension rules came into force on 6 April 2011, there has been huge speculation around the income that can be used to satisfy the Minimum Income Requirement (MIR) and thus enable use of Flexible Drawdown.
The point of the MIR is that the level of income is guaranteed and at a level sufficiently high enough so that retirees will never need to fall back on state benefits. This is currently set at £20,000, but will be reviewed in the future.
A number of companies, along with Dentons, are currently holding back on offering Flexible Drawdown as the Treasury is still consulting on draft regulations associated with the new pension regime.
Already we know that Scheme Pension can only be used where the scheme in question has more than 20 pensioner members and in the past few days the Treasury announced that index linked annuities that offer no protection in case inflation drops, cannot be used towards meeting the MIR.
We also understand that where an annuity has been purchased at least a whole year’s income must have been received rather than promised.
Such changes could have major implications on the income able to satisfy the MIR for Flexible Drawdown and we believe it is wrong to allow clients to effect such arrangements until we are sure there are no more ‘surprises’. Otherwise, clients and trustees could potentially end up facing large taxable charges!