Over-55s will have the flexibility to draw down their pension pots in
chunks, under legislation being published by the government.
Chancellor George Osborne said people should be “free to choose what they do with their money” as measures announced in the budget were set out in the pensions tax bill.
From April, individuals approaching retirement and pensioners will be able to take a series of lump sums, rather than being forced to buy another financial product after a single drawdown. A quarter of each payment will be tax free and the other 75% taxed at their marginal rate.
Osborne said: “People who have worked hard and saved all their lives should be free to choose what they do with their money and that freedom is central to our long-term economic plan. From next year, they’ll be able to access as much or as little of their defined contribution pension as they want and pass on their hard-earned pensions to their families tax free.
“For some people, an annuity will be the right choice whereas others might want to take their whole tax-free lump sum and convert the rest to drawdown.
“We’ve extended the choices even further by offering people the option of taking a number of smaller lump sums, instead of one single big lump sum.”
Pensions campaigner Ros Altmann said: ”The government’s changes have the potential to help millions of pension savers make better use of their pension funds. Being free to access their money freely as they need to, rather than being forced to buy particular products will be very popular.
“Currently, most pension companies are not ensuring that their customers can take money out flexibly. I call on the industry to make sure that people can really benefit from the new pension changes as quickly as possible.”
The government said earlier this year that about 320,000 people would be able to access pension pots flexibly without suffering punitive tax rates. Individuals will be able to pass on their unused defined contribution funds to a nominated beneficiary when they die, rather than paying the 55% tax charge which currently applies.
Chancellor George Osborne said people should be “free to choose what they do with their money” as measures announced in the budget were set out in the pensions tax bill.
From April, individuals approaching retirement and pensioners will be able to take a series of lump sums, rather than being forced to buy another financial product after a single drawdown. A quarter of each payment will be tax free and the other 75% taxed at their marginal rate.
Osborne said: “People who have worked hard and saved all their lives should be free to choose what they do with their money and that freedom is central to our long-term economic plan. From next year, they’ll be able to access as much or as little of their defined contribution pension as they want and pass on their hard-earned pensions to their families tax free.
“For some people, an annuity will be the right choice whereas others might want to take their whole tax-free lump sum and convert the rest to drawdown.
“We’ve extended the choices even further by offering people the option of taking a number of smaller lump sums, instead of one single big lump sum.”
Pensions campaigner Ros Altmann said: ”The government’s changes have the potential to help millions of pension savers make better use of their pension funds. Being free to access their money freely as they need to, rather than being forced to buy particular products will be very popular.
“Currently, most pension companies are not ensuring that their customers can take money out flexibly. I call on the industry to make sure that people can really benefit from the new pension changes as quickly as possible.”
The government said earlier this year that about 320,000 people would be able to access pension pots flexibly without suffering punitive tax rates. Individuals will be able to pass on their unused defined contribution funds to a nominated beneficiary when they die, rather than paying the 55% tax charge which currently applies.
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