It’s been over a year since the Chancellor first announced reforms to how people can access their pension savings. We look at what you need to know about the changes:
Flexibility in retirement
From this April, people aged over 55 will be able to take their defined contribution pension funds in multiple cash lump sums. The first 25% of your pension will remain tax-free and the rest will be taxed at your marginal rate. No tax will be charged if you withdraw less than the annual personal allowance.
Retirement savers will be able to access free and impartial guidance from The Pensions Advisory Service and Citizens Advice, under the guise of Pension Wise, from April 2015. Guidance will be available online, via telephone or at face-to-face meetings.
The 55% tax charge on inherited pensions will be abolished from April 2015. Instead, individuals will be able to transfer defined contribution pension pots tax-free to a chosen beneficiary when they die. Whether or not the beneficiary will pay tax will depend upon the owner’s time of death:
- if they die before 75: the funds will be transferred tax-free and the beneficiary will pay no tax
- if they die after 75: the beneficiary will pay income tax at their marginal rate.
If you would like to discussion your retirement options with us please contact us on 020 7330 0000.