Changes in the Pension Landscape

Pension Tax Relief

In last weeks’ budget, the chancellor announced a number of significant changes to the world of pensions in an attempt to provide greater choice and flexibility at retirement. Some of these changes will come into effect today, 27th March 2014, and others from the 6th April 2015.
The changes can be summarised as follows:
The first set of changes will occur from 27th March 2014:

  • The Maximum Limit for Capped Drawdown will increase from 120% GAD to 150% GAD
  • The ‘Minimum Income Requirement’ (MIR) for Flexible Drawdown will decrease from £20,000 to £12,000
  • The limit for triviality will increase from £18,000 to £30,000
  • The maximum size for ‘Stranded Pots’ will increase from £2,000 to £10,000 and up to 3 such pots will be permitted to be commuted as lump sums per individual.

The next set of changes will occur from 6th April 2015 (although these are subject to consultation):

  • For all ‘Defined Contribution’ pensions up to 25% of the fund can be taken from minimum pension age as a tax free lump sum in the usual way. However, an individual can also then draw any amount of the remainder as a lump sum, which will be taxable at their marginal rate.
  • Pension Providers and Occupational Schemes must provide a ‘Guidance Guarantee’ at retirement. This means that they must offer a free, impartial, good quality face to face meeting with the individual to discuss all of the options available to them.
  • The minimum pension age (MPA) for private pensions will increase from 55 to 57 from 2028 and may then also be linked to the State Pension Age (SPA). The link means that the MPA will always be 10 years below the SPA.
  • Pension contributions made beyond the age of 75 will qualify for tax relief in the same was as contributions prior.

Although clients will have more freedom and flexibility, this does not necessarily mean that what is appropriate for them will change. Therefore, it becomes even more vital that individuals should seek Independent Financial Advice to ensure they make informed decisions on how best to meet their objectives and circumstances.
Bradbury Hamilton, a partner of Raffingers Stuart, provide independent advice on all financial requirements. To find out more please visit www.bradburyhamilton.co.uk or call Sheriar Bradbury on 020 7220 7274.