The implications of ending the effective requirement to annuitise by age 75
Until recently, people with Defined Contribution (DC) pension savings were effectively required by Government regulations to purchase an annuity with their pension fund by the time they reached age 75. Since April 2011 the Government has lifted the effective requirement to annuitise. This Briefing Note summaries the main findings of a PPI research report, which estimates the number of people who might be able to take advantage of the new flexible options for accessing private DC pension savings and explores the possible impact of this policy change on low, median and high earners.
People now have more options regarding accessing their private DC pension savings The Government has removed the effective requirement to annuitise. What this means in practice is that from April 2011, individuals with DC savings are still permitted to purchase an annuity at any point after the age of 55, however they are no longer required to purchase an annuity upon reaching a specific age. The new regulations allow people with private DC pension savings, who have not trivially commuted, to access their savings at any point after reaching the age of 55 using one, or a combination of, three options: purchasing an annuity, Capped Drawdown, or Flexible Drawdown.
People can invest some or all of their pension savings in Capped Drawdown Income drawdown arrangements are investment vehicles, designed specifically for DC pension savings, that allow people to continue to grow their funds while also taking an income, previously up until the age of 75.