Bombshell Budget 2014: George Osborne’s revolutionary pensions reforms
From the Budget document:
“From April 2015, the government will change the tax rules to allow people to access their defined contribution pension savings as they wish from the point of retirement.”
- Drawdown of pension income under the new, more flexible arrangements will be taxed at marginal income tax rates rather than the current rate of 55% for full withdrawals
- Those who continue to want the security of an annuity will be able to purchase one
- Those who want greater control over their finances in the short term will be able to extract all their pension savings in a lump sum.
- Those who do not want to purchase an annuity or withdraw their money in one go will be able to keep their pension invested and access it over time
- The government will introduce a new guarantee that everyone who retires with a defined contribution pension will be offered free and impartial face-to-ace guidance on their choices at the point of retirement.
From 27 March 2014 the government will:
- Reduce the amount of guaranteed pension income people need in retirement to access their savings flexibly, from £20,000 to £12,000
- Increase the capped drawdown limit from 120% to 150% to allow more flexibility to those who would otherwise buy an annuity
- Increase the size of a single pension pot that can be taken as a lump sum, from £2,000 to £10,000
- Increase the number of pension pots of below £10,000 that can be taken as a lump sum, from 2 to 3
- Increase the overall size of pension savings that can be taken as a lump sum, from £18,000 to £30,000