The chancellor pushed income drawdown to the front of the at retirement agenda by promising that members of defined contribution schemes can access as much or as little of their pension as they like from April 2015.
A new Act of Parliament will be required to implement what George Osborne deemed the most “far-reaching reform” to the pension taxation system since 1921.
In the full 121-page Budget document, the Treasury outlined a more “flexible” arrangement that will see drawdown taxed at marginal income tax rates, rather than the current rate of 55 per cent. It stated that those who do not want to purchase an annuity or withdraw their money straightaway will be allowed to keep their pension invested and access it over time. Other notable changes to the drawdown regime will be in place as early as next week, the chancellor revealed.
These measures, include a cut in the income requirement for flexible drawdown, from £20,000 to £12,000, and a rise in the capped drawdown limit, from 120 per cent to 150 per cent.
Adrian Walker, retirement planning manager at Skandia, said: “Consumers with pension pots of up to £10,000 can access their savings without having to buy an annuity. “ Tony Clare, pensions advisory partner at Deloitte, said the reforms were “long overdue”.
However, Billy Burrows, head of business development at Annuity Line, said people could end up worse off if they are tempted to take higher incomes due to higher government actuary department limits.