However, financial advisers will no doubt now be accustomed to surprise announcements and in this regard Budget 2014 did not disappoint with further changes to the pensions rules being announced.
Whilst the reduction of the annual allowance to £40,000 and lifetime allowance to £1.25m from 6 April 2014 were already known, there were radical reforms proposed with regards to how individuals can access their pension benefits.
The following changes took effect from 27 March 2014.
- The minimum income requirement for flexible drawdown has been reduced from £20,000 to £12,000
- The capped drawdown limit has been increased from 120% to 150%
- The 'small pots' threshold was increased from £2,000 to £10,000
- The number of personal 'small pots' than can be taken has no increased from 2 to 3; and
- The threshold for trivial commutation has increased from £18,000 to £30,000
From 6 April 2015
From 6 April 2015, everyone in a defined contribution (DC) scheme will be able to access their entire pension from age 55. The pension commencement lump sum will remain tax free. Any income can then be drawn without limit and will be taxed at the saver's marginal rate for income tax.
These proposals, assuming they remain unchanged, will therefore provide significantly more choice for pension savers. It should be noted, however, that the government has proposed a ban other than in exceptional circumstances, for a member of the public sector DM scheme (unfunded or funded) to transfer to DC scheme. The Government will consult on whether, and if so to what extent, similar restrictions should be imposed on private sector DB scheme defined benefit (DB) to defined contribution (DC) schemes.