The changes to pensions made by George Osborne in his spring budget were radical.
It does highlight one of the main problems with pensions, that the government can change the rules after you have committed your money.
I’ve summarised the rules and highlighted the changes below:-
• You can get retirement benefits out of your fund as now at 55, for current retirees, or earlier if you have ill health.
• You can get 25% of your pension as a tax free lump sum when you start taking your retirement benefits.
• You can then take what you want when you want, but it will form part of your taxable income. This is the big change, giving you complete flexibility over your savings (once you are 55). The down side is that if you take large amounts out you will end up paying higher rate tax on it.
• You can pay up to £40,000 a year into your pension scheme, and you can generally back date these payments for three years.
• You do not need to buy an annuity.
The changes are beneficial to those that want get hold of their cash earlier to invest in other assets such as buy to let property, or just spend during retirement.
If you would like to know more about pensions and the rules in more detail, please give me a call on 0203 282 7109.