The Government wants to give savers more flexibility over their retirement savings. In the 2014 Budget update, George Osborne announced several changes to the way retirement savers can draw their money from their pension. Here is a brief overview of some of the changes and how you may be affected.
From April 2015, there will be more flexibility around how you access your own pension pot. If you plan to retire after April 2015, you won’t need to buy an annuity to access the remainder of your fund. Instead, you can choose to take the whole fund as one or more lump sums. Generally only 25% is tax-free; the rest will be taxable at your usual rate. If you want to retire before April 2015, the current rules will continue to apply.
If you don’t need the income from your pension, it is possible to delay retirement until after April 2015 so that you will qualify for the new rules. Your pension doesn’t necessarily have to link to when you stop working, which means you can stop working and continue paying contributions until you choose.
If you already have an annuity and you are receiving income from it, the proposed changes don’t allow you to change your mind. But remember, your annuity guarantees that your income will be paid for the rest of your life. If you are in the process of buying an annuity, you can change your mind before the annuity is set up (or immediately after if you are still within your cancellation period, which is 60 days).
This is a brief overview and we strongly recommend that you talk to us before you make any decisions about your retirement. We can introduce you to a pensions specialist who will talk you through all your options and help you make the right choices.
This article was compiled by Ashley Barrowclough.
