Budget outlines temporary age 77 rule

The government has proposed raising the age at which members of registered pension schemes have to buy an annuity to 77 as an interim measure before it scraps compulsory annuitisation.

Chancellor George Osborne (pictured) confirmed in the Budget the abolition of compulsory annuitisation at age 75 in April 2011, along with changes to inheritance tax (IHT) charges on pension drawdown funds.

However the chancellor also promised interim measures for those approaching 75 who have yet to secure an income.

The change to the age 75 rule will also apply for the purposes of inheritance tax (IHT) charges that specifically apply to pension scheme members over 75.

In the interim period before the total abolition of the age 75 rule in 2011-12 tax year there will be a 35% charge on lump sum death benefits paid to the scheme if they die on after 22 June 2010 and are aged 75 or over.

For members who are both 75 or over and in drawdown IHT charges will not apply. Previously there could have been a maximum 82% charge on the value of the fund.

Consultation on the rules will begin tomorrow