NEW PENSION RULES - April 2015
Under government proposals due to come into effect from April 2015, you’ll be able to access and use your pension pot in any way you wish after the age of 55. Until then, the rules about how much income you can access as a cash lump sum or through income withdrawal have been relaxed.
Taking your pension from April 2015
From April 2015, you’ll be able to access and use your pension pot in any way you wish after the age of 55.You will be able to:
• Take up to a quarter (25%) of your pension pot tax-free and convert some or all of the rest into a taxable retirement income.
• Take up to a quarter (25%) of your pension pot tax-free and take some or all of the remainder as a lump sum, which will be taxed as if it were income, or
• Withdraw your cash in stages, with a quarter (25%) of each withdrawal tax-free and the remaining three quarters (75%) taxed as if it were income.
You can still continue to save into your pension and benefit from tax relief, even after you have started withdrawing your cash.
From April 2015 you’ll be offered free and impartial guidance on your options by telephone or face to face.
Why the changes?
Most people have used their pension pots to buy an annuity to provide a regular retirement income – and this option will still be available.
The changes are being introduced to offer you complete choice and flexibility about how you use your pension pot to fund your retirement income. They will also encourage more people to save for retirement.
What happens if you die?
It has also been announced that the death tax on pension funds of 55% is to be scrapped. This means if you die before age 75 with some or all of your pension fund still invested, this will pass to your beneficiaries tax-free.
If you are 75 or over when you die your beneficiaries can either:
• Draw money from the fund themselves which will be taxed at their marginal rate (as if it were income), or
• Take the fund as a lump sum, which until April 2016, will be taxed at a flat rate of 45%. From April 2016, lump sums will be taxed at the beneficiaries’ marginal rate.
These reforms apply to payments made on or after 6 April 2015, rather than to deaths on or after 6 April 2015.