What does the Chancellors pension revolution mean for us?

Conrad

Just announced in the budget, the need to no longer purchase an annuity. This is big. Reason I never invested much in my pension was my dislike of the annuity compulsion.





Anyone know what he said about when you can encash your pension?

rpc

Don't know, I only saw the BBC live text. Letting people take the whole amount will be popular but what happens when the masses spend it all in their first couple of retirement years???

edit: I bet it will bring a nice fast tax income too, rather than drip feeding taxes over many years.

Slinky

My understanding is you can take 25% at retirement and then the rest of the pot at income tax rates.

The jist of what he was saying that if you've been sensible enough to save it, you're not going to all of a sudden go mad and blow the lot.

Good news as far as I can see, I didn't fancy taking an annuity.

DesG

I don't understand how that relates to the reduction of the flexible drawdown income limit down to £12K, if you can withdraw what you like, surely Flexible drawdown doesn't need a limit of other income?

And the capped drawdown limit has changed, again, how does that relate to the ability to withdraw what you like?

Triumph13

DesG wrote: »

I don't understand how that relates to the reduction of the flexible drawdown income limit down to £12K, if you can withdraw what you like, surely Flexible drawdown doesn't need a limit of other income?

And the capped drawdown limit has changed, again, how does that relate to the ability to withdraw what you like?

It needs much more fundamental legislation to move to the new 'take is as you like' method so that won't be introduced for a year. The changes to capped and flexible drawdown are simpler and therefore come in pretty well immediately to cover the period until the new regime

Triumph13

Slinky wrote: »

The jist of what he was saying that if you've been sensible enough to save it, you're not going to all of a sudden go mad and blow the lot.

Having seen a relative in Australia blow the lot and end up having to become a minicab driver in his 70's, I'm not sure I have the same level of faith...

wotsthat

It'll be interesting to see how the rules on pension income recycling are changed to prevent a rush on people seeking second tax free lump sums.

Slinky

Triumph13 wrote: »

Having seen a relative in Australia blow the lot and end up having to become a minicab driver in his 70's, I'm not sure I have the same level of faith...

There's always going to be some that will do that, but does that mean we all need protecting from ourselves?

lamb1102

I think it makes saving in a pension a lot more attractive to a lot of people.

boglehead

Triumph13 wrote: »

Having seen a relative in Australia blow the lot and end up having to become a minicab driver in his 70's, I'm not sure I have the same level of faith...

I think we just need to give the option to people - not pushing it on everybody. This is overall a big thing.

I really entice me to put more in my pension than I currently do... The higher allowance on ISA is also very good !

SnowMan

The age at which pensions can be taken is rising from age 55 to 57.

Detail in this budget document (3.30)

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293079/freedom_and_choice_in_pensions_web.pdf

3.30
The government therefore proposes to increase the age at which an individual can take their private pension savings at the same rate as the increase in the State Pension age.

It is important people have the opportunity to plan properly for this change and so the government proposes to wait until 2028 (when the State Pension age will rise to 67) to fully implement this change.

From 2028, people will not be able to draw their private pension benefits without a tax penalty until age 57


3.31
The government’s desire is for the new system to be simple and transparent and therefore proposes that the new minimum age will apply to all pension schemes which qualify for tax relief.

However, views are welcomed on whether this approach is correct, given the issues outlined in Chapter 5 of this consultation, and the recent reforms to pension ages in the public service pension schemes whether or not this is the point at which they stop work. From then on the minimum pension age in the tax rules will rise in line with the State Pension age so that it is always ten years below.