There is now no requirement to buy an annuity and you are no longer penalised if you choose not to.  There is one regime for all ages, with the result that those aged 75 or over have a more beneficial regime than previously, but those under 75 now have lower income limits and higher death charges.

·                    Under the old system, before your 75^th birthday (increased to 77 in June), you had to choose between buying an annuity or moving into an Alternatively Secured Pension (ASP) where charges on death were 70 per cent or 82 per cent.  Today ASPs no longer exist.  You can leave your fund invested for the rest of your life or choose to buy an annuity at any age.

Most people will move into “capped drawdown” when they vest their pension.  The income limits are set by the Government Actuaries Department (GAD) and while previously the limit was 120 per cent for those under 75 and 90 per cent for those over 75, it is now 100 per cent for all ages.  Depending on how long you have been a non UK resident you may be able to receive a higher income than permitted by GAD - talk to an adviser like Blevins Franks to discuss the possibility and suitability of moving your pensions into a QROPS.

·                    On death after starting drawdown there is now a tax designed to recover past tax relief.  This is at a fixed rate of 55 per cent, which is a significant tax increase for those under 75 as their previous rate was 35 per cent.  For those over 75 it is a very welcome improvement on 82 per cent.  Expatriates may be able to move their private pensions into a QROPS and if they then have been non-UK resident for five full and consecutive UK tax years on death their fund will escape this UK charge.

·                    Residual pension assets on death are not additionally subject to inheritance tax.

·                    The 75 age limit at which you can take your pension commencement lump sum has been removed.

·                    The latest age for lifetime allowance test also remains 75.  The allowance will be reduced from £1.8 million to £1.5 million from 6^th April 2012.  If you have pension savings over £1.5 million you have one year to take action to protect your fund from higher taxation.

Since UK pensions are regulated by the UK Financial Services Authority you should only take advice from a firm which is authorised by the FSA for the conduct of pension and investment business, such as Blevins Franks Financial Management Ltd.  The same applies if you wish to explore the advantages and options for transferring your pension funds into a QROPS if you an expatriate.

The tax rates, scope and reliefs may change.  Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change.  Tax information has been summarised; an individual must take personalised advice. 

To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranks.com

By David Franks, Chief Executive, Blevins Franks