People already taking retirement income through an annuity are to be given similar freedoms to access their cash as new retirees.
From April 2015, from the age of 55, people with defined contribution pension savings will have much greater flexibility over the way they use their pension pots, enabling them to buy an annuity, take all their money as a lump sum or keep the money invested and draw an income from it, with the option of withdrawing further lump sums.
Some people with defined benefit pensions will also be able to benefit from the changes by transferring savings to a defined contribution scheme.
In a move that Chancellor George Osborne said would benefit five million people, he confirmed in the18 March Budget that from April 2016, people already receiving income from an annuity would be able, with the agreement of the annuity provider, to sell the income to a third party.
The Budget document said: “The proceeds of the sale could then be taken directly or drawn down over a number of years, and would be taxed at their marginal rate, in the same way as those taking their pension after April 2015.
“The government believes that for most people, continuing to hold their annuity will be the right decision. However, for others, this reform will allow them the flexibility to use the value of their annuity as they see fit.”
Currently, people wanting to sell their annuity face a 55 per cent tax charge, or up to 70 per cent in some cases.
Meanwhile, there is still time to book a place at Moore Thompson’s latest seminar, which will focus on the changes to the way people can access their defined contribution pension savings from next month.
The free event, which will take place from 4.30pm on Wednesday, 15 April in the Function Suite of Spalding’s South Holland Centre, will look at issues including:
- what the changes will mean in practice
- pre-retirement issues, including the pensions lifetime allowance
- maximising tax efficiency – contributions to personal and company pensions and the lump sum
- making the right decisions for your retirement.
To book your place, please contact Louise Bacon at firstname.lastname@example.org or on 01775 711333.