Initially proposed by the Chancellor of the Exchequer in his March 2014 Budget and
confirmed in the Taxation and Pensions Bill published on 14 October 2014, 6 April
2015 saw some very significant changes in the way that people can draw from their
pension funds.
The key change is that there are now no restrictions on what can be drawn from a
pension fund (from age 55). As before, in the majority of cases, up to 25% of the
fund value may be taken as tax free cash. However, since the recent changes took
effect, policy holders may also be able to make more subsequent withdrawals – as
many as you like – with the capital withdrawn being treated as income in the year it
is withdrawn and thus taxed at the recipient’s highest marginal rate.
It is not surprising that the new rules are impacting on people’s views of pensions as
part of their financial planning. Pensions are looking much more attractive to savers
with up to 45% tax relief on personal contributions, up to 25% of the value available
tax free (from 55) and no restrictions on how the remainder is drawn.
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