The Government gave the go-ahead to the dramatic rewriting of the pension rule book. The response to the 2015 'freedom & choice' consultation firms up on the Chancellor's Budget promise of vastly more pension flexibility and details some of the changes due to take place next April. The announcement confirmed:
- pension flexibility will go ahead from April 2015.
- A £10k annual allowance for contributions will apply after a client accesses flexibility, to stop abuse of the new freedom.
- The guidance guarantee will be delivered by governmental bodies like the money advice service and paid for by the industry.
- Tax free cash will stay at 25% of the fund value.
- Final Salary pension transfers will still be allowed - but only after professional advice
- Death benefit tax will come down from 55% - new tax rate to be confirmed in the Chancellors Autumn Statement, but likely to be 40% in our view.
- Normal minimum pension age is going up to 57 from 2028. This is the age that you can access your pension, currently 55.
Here at Lewis, we love the new flexible rules that this creates for income in retirement, but remember that you will have to pay your highest marginal rate of income tax on all but the tax free lump sum.