The government has announced plans to remove rules on the compulsory purchase of annuities for pensioners. Under existing rules, holders of money purchase pension schemes had to use their pension pot to buy an annuity (a guaranteed regular pension from an insurer) by age 75 at the latest. Chancellor George Osborne's budget increased this age to 77, and the intention is to scrap compulsory annuitisation altogether from April 2011.
This is good news for some investors who may currently be forced into buying annuity contracts when markets are depressed and rates are low.
Among the other changes announced is a cap on the amount an investor can "draw down" from their pension pot annually without buying an annuity, unless they can prove they have sufficient other income never to have to rely on the state if their pension fund runs out.
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