UK Government introduces more pension flexibility

OVER-55s will have the flexibility to draw down their pension pots in chunks, under legislation being published by the Government.

Osbourne: People should be free to choose what they do with their money. Picture: Robert Perry

Chancellor George Osborne said people should be “free to choose what they do with their money”.

Details of the flagship reforms unveiled in the Budget are being set out in the Pension Tax Bill.

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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 per cent taxed at their marginal rate.

Mr 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, however people need to know that their pension provider will allow them to take advantage of the new freedoms.

“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 announced earlier this year that around 320,000 people would get the freedom to access pension pots flexibly without suffering punitive tax rates.

Individuals will also be able to pass on their unused defined contribution funds to a nominated beneficiary when they die, rather than paying the 55 per cent tax charge which currently applies.