Commentary before the budget announcement earlier today had suggested that we were in for a surprise and boy did we get one. The chancellor announced the biggest and most wide ranging set of pension reforms in over 100 years!
The measures are designed to make pension withdrawal far more flexible, reduce previously punitive tax rates on pensions and hand back more responsibility to savers to be in control of their own income in retirement.
The main changes announced today include:
The ability to take 25% tax free cash as usual and then take the remainder of a pension pot as cash which will be taxed at an individuals marginal rate.
A reduction in the flexible drawdown limit to £12,000 meaning that far more people will have unfettered access to their pension savings.
An increase in the capped drawdown GAD rate, meaning people in drawdown plans will be able to take a higher income each year.
The ability to take pension pots under £10,000 in cash. This facility can be used on up to 3 pension pots, giving a total of £30,000 which can be taken in a cash lump sum.
A review into the current 55% tax rate on crystallised pension benefits on death.
There are also some other areas which are being consulted on, most notably the intention for the government to prevent people in public sector pension schemes being able to transfer their benefits into an alternative plan.
We will be following developments in this area closely and will be providing further updates as the situation develops.
