Greater pension flexibility announced
14 October 2014
HMRC have announced new measures giving greater flexibility when accessing purchase pension savings.
The HMRC policy paper confirms the greater flexibility individuals will have to access their pension savings from age 55. The paper explains that the changes will:
· remove the higher tax charges where people take pensions under money purchase pension savings as they wish;
· increase the flexibility of the income drawdown rules by removing the maximum ‘cap’ on withdrawal and minimum income requirements for all new drawdown funds from 6 April 2015;
· enable those with ‘capped’ drawdown to convert to a new drawdown fund once arranged with their scheme
· enable pension schemes to make payments directly from pension savings with 25 per cent taken tax-free (instead of a tax-free lump sum)
· introduce a limited right for scheme trustees and managers to override their scheme’s rules to pay flexible pensions from money purchase pension savings
· remove restrictions on lifetime annuity payments;
· ensure that individuals do not exploit the new system to gain unintended tax advantages by introducing a reduced annual allowance for money purchase savings where the individual has flexibly accessed their savings; and,
· increase the maximum value and scope of trivial commutation lump sum death benefits.