Pension Changes 2015

April 2015 will see the end of the retirement world as we know it with no need to buy an annuity and no more income limits. This undoubtedly will raise many concerns for those already in retirement, or planning to take income before April 2015.

Interim measures introduced by the government will ease the transition for those already in or at retirement.

This will provide:

  • Increased drawdown limits; capped drawdown limits have increased from 120% to 150% of GAD for anyone entering or starting a new drawdown year, after 26 March 2014.
  • Decrease in minimum income requirements for flexible drawdown; anyone with secured pension income of more than 12,000 (reduced from 20,000) will be able to enter flexible drawdown.
  • Triviality rule increased from 18,000 to 30,000; this means that for an individual over the age of 60, who has no other pensions can take the entire fund as a one off payment.
  • Small/Stranded Pots increases; an individual can now take up to three pension pots, up to the value of 10,000 each as a lump sum 25% tax-free and the remaining lump sum being subject to income tax.
  • Time to change your mind; individuals now have 18 months to choose an income option after taking their lump sum. Unused pension pots are likely to be treated as uncrystallised, providing greater death benefits. 

It may seem a long way off before the proposals become a reality, however planning for the future starts now. The results of the consultation are likely to be known by late summer, with the fine details made available in the Chancellors Autumn Statement in December 2014.

Changes to the retirement world in April 2015 impact on retirement planning now and those already at, or close to, retirement will be required to take big decisions soon. The immediate relaxations to the rules for annuity purchase, capped income drawdown, flexible drawdown and triviality provide some welcome interim solutions to ease the transition to the new, more flexible, income options available next year.


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