The radical pension reforms announced in the Budget have been confirmed today (21 July), with chancellor George Osborne stating again that “individuals should be trusted to make their own decisions with their pension savings”.
From April 2015, everyone over the age of 55 with defined contribution pension savings will be able to access them as they wish, regardless of their total pension wealth, subject to their marginal tax rate, rather than the previous tax charge of 55 per cent for full withdrawal.
People at retirement will now have the choice to purchase an annuity, take their pension savings as a lump sum, or keep their pension invested and access it over time, for instance through a drawdown product.
Mr Osborne said in his ministerial statement: “These reforms mark a radical departure, by giving choice back to individuals, and since the Budget the government has consulted extensively on how best to implement the changes.
“Under the old system, only those with very large or very small pension pots could access them with any flexibility.”
The government’s full response to the consultation is expected later today. Amongst the changes announced in March were plans to:
• cut the income requirement for flexible drawdown from £20,000 to £12,000;
• raise the capped drawdown limit from 120 per cent to 150 per cent;
• increase the size of a lump-sum small pot to £10,000; and
• increase the overall size of pension savings that can be taken as a lump sum, from £18,000 to £30,000.