Budget 2014: the liberalisation of defined-contribution pensions
The biggest surprises in the chancellor’s budget statement on 19 March 2014 related to pensions. George Osborne announced that, following primary legislation to be put in place over the next year, from April 2015 the tax rules relating to defined-contribution pension decumulation would be relaxed so that the whole pension pot can be taken at any time from retirement, subject only to tax at the individual’s marginal rate (apart from the pension commencement lump sum, which remains tax free).
The details of the proposal will of course be in the legislation, but two issues arise of which trustees and employers should be aware and are discussed below.
It seems probable that the proposed changes will be permissive rather than prescriptive (although the government is consulting on precisely this point), so it will be up to schemes to decide whether members can take the pension in this way rather than being required to allow this. In many cases, the change will be likely to require a deed of amendment, and so necessitate, in principle, agreement by both the employer and the trustees…
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