Budget 2014: Government to scrap at-retirement tax restrictions

THE GOVERNMENT is set to scrap restrictions on how people take pensions income as part of a radical overhaul of tax relief.

From 27 March this year, the government will slash the minimum income requirement for retirees entering flexible drawdown from £20,000 to £12,000 and raise maximum GAD limits for those in capped drawdown from 120% to 150%, Accountancy Age’s siter publication Professional Pensions reports. 

In a widely anticipated move Osborne also raised trivial commutation limits from £2,000 to £10,000 while total pension savings you can take as a lump sum will almost double to £30,000.

It will also increase the trivial commutation lump sum limit from £18,000 to £30,000.

However the government plans to be even more radical. From April 2015, the government plans to allow anyone over the age of 55 to take their entire pensions pot as cash, subject to their marginal rate of income tax in that year.

The government also proposes to raise the age at which an individual can take their pension savings under the tax rules from 55 to 57 in 2028.

And it also plans to offer all DC scheme members access to free and impartial face-to-face guidance on the range of options available to them at retirement.

Delivering the changes Osborne said: “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.”

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