Chancellor George Osborne’s penultimate Budget before the next election brought radical changes to pensions and savings.
In a surprise move not predicted by experts, Osborne announced the removal of tax restrictions on pensioners’ access to their pension, ending the requirement to buy an annuity.
Total pension savings taken as lump sum will also be doubled to £30,000, while the taxable part of pension pot taken as cash on retirement is to be charged at the normal income tax rate.
Major changes to savings included scrapping the 10p starting rate of tax for savings, and merging cash and stocks and shares ISAs into a new single “super ISA” with an upper limit of £15,000.
The Government are also raising the limits for Junior ISAs and Child Trust Funds from £3,720 to £4,000. These changes will be introduced from 1 July 2014.
The changes to the rules on pensions mean that, from 2015, pension savers will be given free access to spend or invest their pot as they wish, once they have reached the qualifying age.
And while pension savers will, as the Government Pensions Minister recently said, have the freedom to spend their pension on a Lamborghini if they wish, they should be careful not to fritter their savings away.
The new freedom will bring a significant burden of responsibility on individuals facing retirement to make the right financial decisions.
Some bodies have concerns that people often underestimate how long they will live and overestimate how long their pot will last.
People should remember that from this month, the maximum amount that you are allowed to hold in your pension and the annual contribution allowance is reducing significantly.
After 6 April, the maximum lifetime pension allowance will be £1.25 million (reducing from £1.5 million) and the maximum annual pension contribution allowance will be £40,000 (reducing from £50,000).
Our lifestyle services team have many years experience in advising people who are planning for, thinking of, or recently retired.
We can advise on how best to protect your assets, and manage your income provision in retirement.