Those nearing 75 urged to weigh up all options carefully

Alliance Trust Savings, a leading SIPP provider, today urged all those saving for retirement to consider carefully all their options for taking income from their SIPP as they approach the age of 75.

Alliance Trust also notes that the government and pensions providers should help clarify widely held misconceptions about pensions rules, such as that annuities are the only option for people aged 75 and over to take SIPP income, when this is not the case.

"Many people saving for retirement will be confused about their options, and should consider the different types of income available when they retire. It is not true that all individuals must purchase an annuity by age 75. Some pensions, SIPPs for example, allow individuals to continue to withdraw an income directly from their pension fund under the Alternatively Secured Pension (ASP) rules," Steve Latto, Pensions Development Manager for Alliance Trust, commented.

ASPs are not right for everyone, however, as the income available for withdrawal from an ASP fund is not guaranteed because it will depend on how the investments chosen within the ASP perform over time and changes to long-term interest rates. Income limits for those with an ASP fund are recalculated annually. In addition, those saving for retirement also need to bear in mind the costs associated with running an ASP fund and the taxation position of any remaining ASP fund on death.

The Conservative party is currently trying to amend the government's personal accounts legislation, to remove the obligation to buy an annuity by age 75. Alliance Trust believes that by also avoiding punitive tax charges on death, the government would be taking a vital step towards encouraging people to save for retirement using these accounts.

Steve Latto continued: "We would encourage the government to think carefully about ways to encourage future generations to save for retirement. While it has stated that it does not want pension funds to be used as a mechanism to pass on assets on death, if the transfer could be made to the pension fund of another family member this could help provide future generations with a decent income in retirement without having to rely on the state. It would also make saving for your own retirement a much more attractive option, if you knew that any wealth, unused in your own lifetime, could be transferred into the pension pot of the next generation."