Your Money: Bill introduces lump sum pension reforms

Details of changes to tax rules that will allow over 55s to access their defined contribution pension pots with more flexibility from April 2015, have been published in the Taxation of Pensions Bill.

Under current rules, savers can take 25% of their pot as a tax-free lump sum and put the remaining 75% in a drawdown account. Any amount withdrawn from the drawdown account is taxed at the individual’s marginal rate of income tax.

From April 2015, there will be the option to take multiple lump sums from a pot without having to open a drawdown account. 25% of each lump sum will be tax-free and the remaining 75% will be taxed at the individual’s marginal rate.

Savers welcome retirement guidance

Elsewhere, a survey by the Chartered Insurance Institute found that 92% of people who are 5 years from retirement would consider using the free and impartial pensions guidance proposed by the government.

Michelle Cracknell, chief executive of The Pensions Advisory Service, said:

“We have countless examples of the life changing impact high quality guidance can have on people’s lives. We believe that it is essential that the guidance is delivered by specialists that have the experience and knowledge to respond to how people feel about this subject and get them to engage.”
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