Last year’s Autumn Statement confirmed the dawning of a new era in pensions.
A number of the changes had already been identified – for example, the removal of the cap on drawdown income from April 2015, which will allow all individuals to take as much or as little as desired from their pension pot, though the income will still be subject to tax.
However, that Autumn Statement also brought in new rules whereby the new lump-sum withdrawal option – 25% tax-free and 75% subject to income tax – will be added to the existing choices of annuitisation, drawdown and tax-free cash when individuals take their benefits.
New rules were also introduced to prevent individuals making contributions that attract tax relief and then immediately making lump-sum withdrawals, a proportion of which will be tax-free. People who access a pension under the new flexible rules will only receive tax relief on contributions of up to £10,000 gross each year afterwards. There are limited exceptions which we can explain further.
Another significant change has been the treatment of residual pension pots on death, as the Autumn Statement confirmed the abolition of the 55% tax charge imposed on pension pots in certain circumstances.
A further positive note was that spouses who continue to receive annuity income after the death of their wife or husband will enjoy the same tax breaks.
Still, with every silver lining must apparently come a cloud and the Government also announced the minimum pension age would increase from 55 to 57 from April 2028 onwards.
Once again, we would encourage all clients to contact us at Platinum if they have any concerns about their pensions or wish to discuss the impact further.