HMRC grants more flexibility for drawdown reviews

Her Majesty’s Revenue and Customs (HMRC) has announced changes to allow investors more flexibility when organising their annual drawdown reviews.

Investors aged 75 and over using capped drawdown must have a review of their income levels every year to prevent withdrawing their funds too quickly.

However, investors who began withdrawing different tranches of their drawdown fund at different times will find their pension review dates are different for each tranche.

This means an investor with five different tranches in drawdown would have to have five reviews per year.

This can happen when investors begin withdrawing their pensions under various pension schemes with different anniversary dates, and then later combine all of their benefits into one scheme.

In April last year, HMRC announced it would allow investors aged over 75 to align the pension review dates for all their tranches by shortening some years.

This month, HMRC confirmed it will update guidelines to allow investors to align their pension tranche years by lengthening years as well, providing more flexibility for investors.

Gareth James, technical marketing manager at AJ Bell, said: "This change will make it even simpler for those aged 75 and over to merge all their pension years together.

"In turn this will enable advisers to simplify their clients' drawdown and reduce any additional review costs."