The government has announced a series of major changes to the way that people who are members of defined contribution pension schemes can access their savings. The changes mean a move away from the current system where you have to buy what’s called an annuity policy when you reach your retirement. This has been very inflexible in the past.
Under the new proposals which are due to come into force from April of next year, you will be able to access your pension fund without the need to purchase an annuity. The current tax free lump sum withdrawal of 25% stays, but any money that is withdrawn you will be taxed at your normal rate of income tax.
These new flexibilities, which include being able to make multiple withdrawals will be available when people reach 55.
The law is changing to allow schemes to be more flexible, but not all schemes will necessarily change. It may be necessary to transfer into a different scheme to gain from these new rules.
The government has also promised that all people with a deferred contribution pension approaching retirement will have access to ‘good quality, free and impartial guidance’, what is being called the ‘guidance guarantee’. It has also just announced that it will be appointing the Citizens Advice Service to provide the local face to face part of this new pensions’ advice service.
Some of the rules and regulations about these changes are still not known, and a number of pension providers are saying that they will struggle to make the changes in time for next April – so if you think these changes might apply to you, or your pension, you need to keep a look out for any news or correspondence about your pension.
These will be very big decisions, which will affect the rest of your life so you will need to think very carefully before deciding what to do.
The Pensions Advisory Service
Helpline: 0300 123 1047
The Pensions Advisory Service is an independent organisation that gives free information and advice on pension planning, including state, personal, workplace and stakeholder schemes.
TPAS doesn’t provide financial or investment advice or recommend products.
For help from Salford Citizens Advice visit your local bureau in Eccles, Irlam and Cadishead, Salford City, Swinton, Walkden or at Salford Royal.
Telephone our advice line: 0844 826 9695 (if calling from a landline or if calling from a mobile 0300 456 2554).