Get an immediate vested pension annuity, with best pension annuity rates available. Pensions and annuities can be very complex creatures. The whole pension annuity regime is a web of rules and regulations. But discovering some of the tricks of the trade that are available can benefit you greatly. Immediate vesting is a way of topping up your pension fund and then using it to buy an annuity income for your retirement straight away. An immediate vesting personal pension (IVPP) arrangement can be taken out with a lump sum paid out of your own savings or by transferring your existing pension plans into the arrangement. Then, believe it or not, you’ll actually qualify for tax relief on the payment.
As per the normal rules and regulations on tax relief, basic rate taxpayers will benefit from a 20% uplift to their contribution once their tax relief has been added, while higher rate taxpayers will get 40% tax relief with the extra 20% claimed via their tax return. For example, if you transferred a pension fund worth £10,000 and you’re a basic rate taxpayer, you’ll benefit from an extra 20% from the tax man. So, an IVPP is an easy way of increasing your pension for free with tax relief when you get to retirement. The downside, and yes, there is one, is that you can only take 25% of the IVPP as a tax-free cash lump sum. You then have to buy an income (known as an immediate vesting annuity) with the remaining funds. Your contribution to one of these IVPP plans can’t be more than 100% of your taxable earnings for the tax year in question, and you must be at least 50 and under the age of 75 when you buy an IVPP. After 6 April next year you must be at least 55.
The amount of income you get will be based on a number of factors including: the value of your IVPP arrangement when it’s converted into an income for you using an immediate vesting annuity, the best pension annuity rates at that time, how often that income is paid to you, your age and sex, and the options you choose for your pension annuity such as perhaps providing a spouse’s pension and inflation-proofing your annuity income. Mind, you should always check that the income you’ll get from one of these immediate vesting annuities is on competitive annuity rates before you commit to an IVPP, as not all annuity providers offer them.
