“This government believes in the principles of freedom, Individuals who have worked hard and saved responsibly throughout their adult life should be trusted to make their own decisions with their pension savings” – George Osborne
Is this the final curtain for Lifetime Annuities?
As of April 2015, there will be no restrictions on the amount of income to be taken from a pension. George Osborne is clearly giving people more freedom in terms of how they receive their pension and by doing so some would argue he has he destroyed the annuity market. Barclays predict that the annuity market could shrink by two thirds in the next 18 months.
Flexible Access to Pensions
From April 2015 the majority of savers with pensions who are aged at least 55 will have total freedom as to how they take their pensions:
- Take their whole fund in one go with 25% tax free and the balance taxed as income
- Take adhoc amounts whenever they want subject to 25% of fund value tax free and the balance taxed as income
- Take 25% of fund tax free now and the balance remains invested providing income through income draw down from their pension fund at intervals suited to their needs
Now for the bad news!
- From 2015 the maximum that can be invested in a pension is subject to an annual allowance which from April 2015 has been reduced to £40,000.
- The lifetime allowance for pension contributions has also been reduced from £1.25 to £1 million for 2016/17 and the allowance will be indexed by CPI from 2018/19
PensionWise is a new government initiative which has useful links for pension savers. Please click the link to find out more about what you can do with your pension pot:
PensionWise cannot give advice but can give options. It is certainly very helpful in making sure everyone has a better understanding of what Pension Freedom actually means!
At the end of the day the need for advice has never been greater. Our experienced advisers are here to help if you have existing pension schemes from previous employment and have questions about your options. In addition, we are happy to help you understand exactly which of the new freedoms is most appropriate for you and how do you take advantage of these new rules; we are here to help.
To learn more, please call your WMG adviser or if you are new to WMG, please email us on firstname.lastname@example.org or call Hilary on her direct line 01274 957717