RPI-linked annuities will count towards the minimum income requirement (MIR) for flexible drawdown, the final Finance Act 2011 has confirmed.
Flexible drawdown, available since April this year, allows investors to withdraw unlimited amounts from their pension fund provided they have an MIR of £20,000 per year.
In the last draft of the Finance Bill before it became law, legislation banned RPI-linked annuities from the MIR on the grounds they could fall in value as well as increase.
However, the final legislation confirms RPI-linked annuities will count towards the MIR.
The majority of RPI-linked annuities now have a "floor" below which income cannot fall, regardless of investment performance.
AJ Bell and Hornbuckle Mitchell both predicted in March the Treasury would review its stance on inflation-linked annuities.
Both providers said it was illogical to encourage flat-rate annuities as MIR sources, as they are not protected from inflation and so would quickly decrease in value in real terms.
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