Pension Freedom and Choice
The freedom and choice in pension promised by, the Chancellor in his March 2014 budget, will apply from 6 April 2015. The key points are detailed below:
- Full access to take as much as you want from your Defined Contribution (Personal Pension) pension pots for individuals aged 55 or over from April 2015.
- Tax Free Cash entitlement will remain at 25% of the fund, with any additional lump sum withdrawals or income being taxed as earned income.
- The minimum age for accessing pension benefits will rise to age 57 in 2028, when the State Pension Age goes up to age 67.
- No tax on death benefits for individuals who die before age 75.
- On death before age 75 annuity payments and guarantee payments are paid tax free.
- If you die after age 75 the income payments or lump sum will be taxed at the beneficiary’s marginal rate.
- Similarly annuities will be taxed at their marginal rate where the annuitant dies after age 75.
- The Lifetime Allowance (LTA) still applies and any benefits in excess of the LTA will be taxed in the normal way.
- The Annual Allowance will remain at £40,000 for the 2015/2016 tax year.
- Transfers from funded Defined Benefit (Final Salary) Pension Schemes will still be allowed, however only after professional independent financial advice has been given.
It is clear that the legislation changes announced in the March 2014 budget will change significantly the way money is drawn out of a pension arrangement. If you want to take tax free cash, a lump sum or some income now, you should contact us to discuss Income Drawdown.
The increased flexibility available as to how and when you access pension benefits will increase the need for individuals to seek independent financial advice.
While you can withdraw all of your fund in one go, you must consider the tax implications of such action. You will also need to make sure that your money does not run out.