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Budget 2014: Osborne outlines dramatic pensions overhaul

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Budget 2014: Osborne outlines dramatic pensions overhaul

The government has unveiled dramatic pension reform targeting the annuity and drawdown regimes.

From April 2015 people will be able to access pension savings as they wish at the point of retirement, subject to their marginal rate of income tax, rather than the current 55% charge for full withdrawal.

Ahead of this reform chancellor George Osborne has introduced immediate, interim measures to make drawdown more accessible by cutting the income required for flexible drawdown from £20,000 to £12,000 and raising the Government Actuary's Department rate for capped drawdown from 120% to 150%.

He  also announced changes to the trivial commutation rules, increasing the size of the pot which can be cashed in to £10,000 from the current £2,000, and the lifetime limit from £18,000 to £30,000.

He said no one would have to buy an annuity anymore and that those who did, in a defined contribution scheme, would have access to impartial face-to-face advice.

Andy Bell, AJ Bell chief executive, welcomed the measures.

‘This is fantastic news for pension savers,’ he said. ‘Income drawdown has served us well for nearly 20 years, but it has passed its sell by date.

‘Pension savers will be able to get tax relief on pension contributions and invest it tax free until they need it.’

‘Breaking the link between how much a pension saver can take from their  own pension pot and a dysfunctional annuities market is an eminently sensible move.’

‘We are seeing the start of the end of the dysfunctional annuities market.’

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