Under current tax rules, once a tax free lump sum has been taken, individuals have six months before they are required either to buy an annuity or enter into capped drawdown.
If this is not done, the lump sum is then taxed at 55 per cent but the Treasury said the extra time awarded today would “allow people to make the right decision for their pension”.
Exchequer secretary to the Treasury David Gauke said: “At Budget the government announced the most fundamental change in the way that people access their pension in almost a century, ensuring that over 400,000 people who have worked and saved hard will be able to access their retirement savings more flexibly.
“However we recognise that decisions people take regarding their pensions are important and take time. This extension to the decision making period will give people the opportunity to take full advantage of the new flexibilities introduced at the budget.”
In the March Budget George Osborne revealed sweeping changes to the way people can access their defined contribution pension savings, allowing them to draw their savings as a lump sum, draw them down over time or buy an annuity.
Aj Somal, chartered and certified financial planner at Birmingham-based Aurora Financial Planning, said: “This is good news for clients who recently took lump sums and are unsure what to do. They won’t be forced to make a decision now, and can wait and see what types of products are developed.”
