The new regime that will apply to pensions from April 2015 was the chief surprise in this year's Budget.
Under the old tax rules applying to pensions, an individual had to decide within six months of taking the tax-free lump sum whether to take an annuity or enter into a pension drawdown arrangement, but on 9 April 2014 the Government announced a change of heart and extended the time limit to 18 months.
In addition, the Government announced additional flexibility for how pension policy owners can access their defined contribution pension savings, including:
- reducing from £20,000 to £12,000 the amount of guaranteed income people need in retirement to access their savings flexibly;
- increasing from £18,000 to £30,000 the amount of total pension savings that can be taken as a lump sum;
- increasing the capped drawdown withdrawal limit from 120 per cent to 150 per cent of an equivalent annuity;
- increasing the maximum size of a small pension pot which can be taken as a lump sum (regardless of total pension wealth) from £2,000 to £10,000; and
- increasing the number of personal pots that can be taken under these rules from two to three.
More recently, the Government has announced that it will introduce rules to prevent pensions being exploited for tax avoidance purposes.