Wragge Lawrence Graham & Co

UK 200 2014 position: 28

DC deliberations on the Budget

This year’s Budget has grabbed the pensions headlines. The implications for pensions are likely to be significant, with consequences for defined-contribution (DC) schemes and, indirectly, for defined-benefit (DB) schemes. Will the changes be more far reaching than the headlines have anticipated?

What did the Budget say about DC pensions? This year’s Budget changes in respect of pensions have had a lot of coverage but, in summary, can be split into two blocks: the 27 March 2014 changes and proposed reforms scheduled to take effect in April 2015.

27 March 2014 changes:

  • Increasing the maximum amount that can be taken each year from a capped drawdown arrangement from 120 per cent to 150 per cent of an equivalent annuity;
  • Reducing the amount of guaranteed income needed in retirement to access flexible drawdown from £20,000 each year to £12,000 each year;
  • Increasing the trivial commutation lump-sum limit from £18,000 to £30,000; and
  • Increasing the size of a small pension pot that can be taken as a lump sum from £2,000 to £10,000…

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