In March 2014, Chancellor George Osborne announced radical changes to the way people can take an income from their pension, stating that savers could withdraw their entire pension fund if they wished.

Currently, those retiring have a choice either to buy an annuity, which pays a guaranteed income for life, or leave their money invested in an income drawdown scheme, which allows them to take a certain amount of income subject to government rules.
This new pension freedom will allow individuals to withdraw all of their pension savings and the first 25% of the value of your pension fund can be withdrawn completely free of tax.

Amounts withdrawn in excess of the tax free amount, will be taxed at your marginal rate, dependant on the amount withdrawn.
For example, if you withdraw less than £10,000 from your pension, you won’t pay any tax, providing that you have no other income from any other sources. If you withdraw £150,000, you will pay tax at the highest rate of 45%.

The government set new rules that will enable all pension scheme providers to allow funds to be withdrawn from your pension scheme in the new, more flexible way.

The minimum age you from which you can take your pension remains at 55.

The government has recently announced changes on how your fund will be taxed should you die before or during taking benefits, this all depends on whether you are aged 75 over.

With all this increased flexibility, saving into a pension scheme has never been more appealing, unfortunately, annual contributions remain restricted to the maximum of the annual allowance of £40,000 or 100% of your earnings.
The reform is due to be implemented in April 2015.

To find out how this may more specifically apply to you, email us at annie@celandine.co.uk