New 'shock announcement' changes
31/03/2011
Announcements made today (31 March) in the final draft of the Finance Bill 2011 have created a ‘last minute shock' to the industry through the statement that Scheme Pension, through a SIPP or SSAS, will not now be suitable for meeting Flexible Drawdown Minimum Income Requirements (MIR).
Flexible Drawdown enables pension to be withdrawn at a rate greater than Capped Drawdown (the replacement for Unsecured Pension from 6 April) and is dependant upon a MIR being satisfied. For Scheme Pension to qualify as a suitable income stream, there must now be at least 20 members in the scheme which basically excludes its use through a SIPP or the majority of SSASs.
For Providers like ourselves, who are generally able to adapt quickly to market changes, and currently offer Scheme Pension through our Flexible Pension SIPP and SSAS, we will have to consider if offering Flexible Drawdown from 6 April is viable until the finance Bill is finally passed – which could be as late as July.
Potentially a pensioner who qualifies for MIR now could have drawn their entire fund and wound up their scheme, when there might be a last minute amendment to the Bill where income used to qualify for the MIR may no longer apply.
Scheme Pension provides an income fixed at outset and may be guaranteed for up to 10 years. It can be particularly suitable for some individuals who are in ill-health.
The changes announced today could cause delay in implementation of Flexible Drawdown.