What does the Chancellors pension revolution mean for us?

A question about : What does the Chancellors pension revolution mean for us?

Just announced in the budget, the need to no longer purchase an annuity. This is big. Reason I never invested much in my pension was my dislike of the annuity compulsion.

Anyone know what he said about when you can encash your pension?

Best answers:

• Don't know, I only saw the BBC live text. Letting people take the whole amount will be popular but what happens when the masses spend it all in their first couple of retirement years???
  edit: I bet it will bring a nice fast tax income too, rather than drip feeding taxes over many years.
• My understanding is you can take 25% at retirement and then the rest of the pot at income tax rates.
  The jist of what he was saying that if you've been sensible enough to save it, you're not going to all of a sudden go mad and blow the lot.
  Good news as far as I can see, I didn't fancy taking an annuity.
• I don't understand how that relates to the reduction of the flexible drawdown income limit down to Ј12K, if you can withdraw what you like, surely Flexible drawdown doesn't need a limit of other income?
  And the capped drawdown limit has changed, again, how does that relate to the ability to withdraw what you like?
• It'll be interesting to see how the rules on pension income recycling are changed to prevent a rush on people seeking second tax free lump sums.
• I think it makes saving in a pension a lot more attractive to a lot of people.
• The age at which pensions can be taken is rising from age 55 to 57.
  Detail in this budget document (3.30)
  https://www.gov.uk/government/upload...nsions_web.pdf
  Quote:
• "And so, third, we will completely change the tax treatment of defined contribution pensions to bring it into line with the modern world.
  There will be consequential implications for defined benefit pensions upon which we will consult and proceed cautiously.
  So the changes we announce will not today apply to them.
  But 13 million people have defined contribution schemes, and the number continues to grow.
  We've introduced flexibilities.
  But most people still have little option but to take out an annuity, even though annuity rates have fallen by a half over the last 15 years.
  The tax rules around these pensions are a manifestation of a patronising view that pensioners can't be trusted with their own pension pots.
  I reject that.
  People who have worked hard and saved hard all their lives, and done the right thing, should be trusted with their own finances.
  And that's precisely what we will now do. Trust the people.
  Some changes will take effect from next week.
  We will:
  cut the income requirement for flexible drawdown from Ј20,000 to Ј12,000
  raise the capped drawdown limit from 120% to 150%
  increase the size of the lump sum small pot five-fold to Ј10,000
  and almost double the total pension savings you can take as a lump sum to Ј30,000
  All of these changes will come into effect on 27 March.
  These measures alone would amount to a radical change.
  But they are only a step in the fundamental reform of the taxation of defined contribution pensions I want to see.
  I am announcing today that we will legislate to remove all remaining tax restrictions on how pensioners have access to their pension pots.
  Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want.
  No caps. No drawdown limits.
  Let me be clear. No one will have to buy an annuity.
  And we're going to introduce a new guarantee, enforced by law, that everyone who retires on these defined contribution pensions will be offered free, impartial, face-to-face advice on how to get the most from the choices they will now have.
  Those who still want the certainty of an annuity, as many will, will be able to shop around for the best deal.
  I am providing Ј20 million over the next two years to work with consumer groups and industry to develop this new right to advice.
  When it comes to tax charges, it will still be possible to take a quarter of your pension pot tax free on retirement, as today.
  But instead of the punitive 55% tax that exists now if you try to take the rest, anything else you take out of your pension will simply be taxed at normal marginal tax rates - as with any other income. So not a 55% tax but a 20% tax for most pensioners.
  The OBR confirm that in the next fifteen years, as some people use these new freedoms to draw down their pensions, this tax cut will lead to an increase in tax receipts.
  These major changes to the tax regime require a separate Act of Parliament - and we will have them in place for April next year."
• Does this include people who have paid into a private pension, rather than an employer provided pension. A relative has one and I'm not sure if this is going to affect her.
• (2 page factsheet): Budget 2014: Greater choice in pensions explained
  https://www.gov.uk/government/upload..._explained.pdf
• Can anyone explain what the following is about?
  "We're increasing the amount of overall pension wealth you can take as a lump sum from Ј18k to Ј30k"
  I thought you could already take 25% of your pension as a cash lump some with no limit? Is that not so?
  Maybe it is the limit for trivial pensions its referring to.
• I think that just applies to people with small pension pots ie
• Free pension advice .....IFA's will be selling off their Porsch's and BMW's heh heh
• This is a monumental move and this day should go down in history.
  I am a 30yr old male with a pension pot already into 6 figures and the thought of buying an annuity at the age of 65 at around Ј3.8k pa (3% inflation linked) or Ј5.5k fixed, it annoyed the crap out of me as it is downright daylight robbery. You have to live around 20yrs just to get your money back at these rates and that is ignoring the potential re-investment of funds generating growth to the initial pot.
  This was a surprise and a very good one at that. Things needed to change and now things have moved up a hundred levels with regards to pension savings. These companies offering awful annuities will need to start re-thinking otherwise they are going to go out of business. I'm sure some greedy robbing IFA's will go out of business too as managing the funds yourself will cut out this costly middle man
  I now wonder if it is worthwhile cashing in even final salary schemes into this new plan if possible? If you have a history of early death running in the family, you would surely want access to all funds as soon as possible to manage them yourselves?
  Many many questions but this is MONUMENTAL.
  MAJOR THUMBS UP