In his annual Budget statement, Chancellor George Osborne announced the removal of all tax restrictions on pensioners’ access to their pension, ending the requirement to buy an annuity.
Total pension savings taken as lump sum will also be doubled to £30,000, while the taxable part of pension pot taken as cash on retirement is to be charged at the normal income tax rate. Major changes to savings included scrapping the 10p starting rate of tax for savings, and merging cash and stocks and shares ISAs into a new single ISA with an upper limit of £15,000. The Government are also raising the limits for Junior ISAs and Child Trust Funds from £3,720 to £4,000. These changes will be introduced from 1 July 2014.
Hertfordshire-based independent financial advisers Birchwood Investment have welcomed the Government’s radical changes to pensions and savings. Trevor Simms, managing director at Birchwood, said: “Changes concerning the annuity rules at a time when interest rates are at a generational low is a welcome move by the Chancellor and offers clients greater choice and control over their pension savings at retirement. “Punitive tax charges are being scrapped, and the need to buy annuities will go altogether. “There is also great news for savers with the implementation of a new ISA with an increased upper limit. “We would urge all pensioners and savers to discuss with an independent financial advisor how they will benefit from these changes.”
