There have been some radical changes announced in today's Budget with regards to the pensions environment. Many of these will be positive for pension savers and those in retirement.

 

There have been some radical changes announced in today's Budget with regards to the pensions environment. Many of these will be positive for pension savers and those in retirement.

In the short term, the cap drawdown limit will be increased from 120% to 150% of the equivalent annuity rate and the earnings limit for flexible drawdown will be reduced from £20,000 to £12,000 – both of these give significantly greater access to people's defined contribution pension savings.

In addition, there are changes about the trivial commutation rules and the access to small pots which will bring more savers into this environment.

The Government has also announced their consultation with the intention being that from April 2015 there will be effectively unlimited access to funds accumulated within their pension once a person reaches retirement.

The 25% tax free lump sum will remain but beyond that, any further withdrawals from the pension will simply be taxed at the pensioner's marginal tax rate. There will be no effective penalty for doing so. Effectively, this means that flexible drawdown, where unlimited access is available to pension funds, will be available to all without any requirement to meet the minimum income requirement.

This gives great flexibility to those in retirement with funds and there will be no compulsion to buy an annuity and funds can be drawn as and when required.

Overall, these changes represent a huge increase in the flexibility of retirement income options and, therefore, can only be seen as appositive for those at, hear or in retirement with accumulated pension savings.

This content was generated prior to Turcan Connell Asset Management Limited operating as Tcam.