The Government is due to announce full details of its pension reforms, saying it wants people to use their private pensions “like a bank account”.
It has now announced more detail of measures that will allow people to dip in and out of their pensions as they like.
The current rules state that you can withdraw a tax-free lump sum of up to 25% of the value of their pension, and this has to be paid either up to six months before or a year after you start receiving your pension income.
That will be scrapped, so you will now be able to withdraw a lump sum regularly if you choose. However, the 25% rule will remain, so only 25% of that amount will be tax free, with the rest taxed at your marginal Income Tax rate (20%, 40% or 45% depending on your income).
Chancellor George Osborne said: "People who have worked hard and saved all their lives should be free to choose what they do with their money, and that freedom is central to our long-term economic plan.
“We've extended the choices even further by offering people the option of taking a number of smaller lump sums, instead of one single big lump sum.”
Other changes to come
This latest announcement follows previous ones on the removal of the so-called 55% ‘death tax’ for inherited pensions, the scrapping of limits on income drawdown, the ability to transfer a final salary pension into a personal one and new guidance on pensions.
For a more detailed look at these, read Why pensions are now the best way to save.
All these new measures are due to be set out in Parliament later today (Tuesday).
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