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Financial freedom for pensioners

21st July 2014

Two new Bills are to be introduced which will make major changes to our pensions system.

Firstly, the Pension Tax Bill (England, Wales, Scotland and Northern Ireland) will allow those over 55 with defined contribution pensions to withdraw their savings as they wish, subject to their scheme rules and marginal income tax payments. You won’t have to buy a guaranteed lifetime annuity with your pension pot and existing restrictions on accessing your pension entitlements will be abolished. There are going to be some new rules introduced to stop people exploiting their pensions for tax avoidance.

Secondly, the Private Pensions Bill (England, Wales, Scotland and Northern Ireland) will create a new type of pension. Called a ‘defined ambition collective pension scheme’ this type of pension will allow thousands of people to pay into the same scheme and share the risk of investing as well as the size of such a scheme potentially enabling investors to bargain for lower fees and costs.

Anyone approaching retirement who has a defined contribution scheme will be entitled to impartial guidance on the options available on retirement, to help them make the most of their pension pot. There is a debate about what ‘impartial guidance’ will mean. For example, is it ok to have a general talk for those approaching retirement or would an individual appointment with an impartial pensions expert/financial adviser be needed?

The government is consulting on whether it is appropriate for it to be able to prohibit people moving out of certain types of pension schemes. You can read more about the consultation and proposed changes to our current pension regime here.

Pensions are notoriously complicated and we think that anything that helps people understand their pension options better and have more security in retirement is a good thing! Whether or not the changes will make any difference to the thousands of people without adequate pension provision remains to be seen. Our prediction is that the number of part-time, older workers will continue to grow…


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