2014 Budget – Changes to UK pensions

Sandy King
In the News

The 2014 budget includes radical changes to the UK pensions taxation system. Some of the changes are immediate, others are proposed to take effect from April 2015 after consultation.
Changes from 27 March 2014 
1. For the over 60´s pension rights worth up to £30,000 may be taken in cash, but 75% of the amount cashed in will be subject to UK tax.

2. The maximum income permitted from “capped drawdown” increases from 120% to 150% of the amount available from an annuity.

3. If you have secure income of at least  £12,000 p.a. then up to 100% of your UK pension fund may be taken as a lump sum at age 55 or later but will be taxed.

4. The size of a small pension pot which can be taken as a lump sum from age 60 or later increases from £2,000 to £10,000.  But 75% of the amount cashed in will be subject to UK tax.  The number of personal pots that can be taken under these rules goes from two to three.
These changes lead in to the proposed regime from April 2015.  
Proposed changes from April 2015.
In summary:
1. These elements are subject to consultation.  We do not expect the definitive position to become clear until late 2014.

2. Members of UK defined contribution schemes will be able to access unlimited amounts through drawdown from age 55 with UK tax payable at their marginal rate.

3. It is proposed that public sector pension scheme members will not be able to transfer out to a defined contribution scheme (which would include a QROPS) except in exceptional circumstances. There is no indication of what those exceptional circumstances might be.

4. It is proposed that members of private sector defined benefit pension schemes will also not be able to transfer out to a defined contribution scheme once again “except in exceptional circumstances”.

5. The lowest age at which benefits may be taken from a UK pension scheme is to  increase from 55 to 57 from 2028.

6. Reducing the 55% special lump sum death benefit charge.
A  General Election takes place in May 2015.  We have no indication about the position of the Labour Party on these proposals.