A number of changes to the UK pension system, which were announced in the Budget 2014 on 19 March, take effect on 27 March, with the publication of the Finance Bill 2014.
In the Budget 2014, Chancellor George Osborne (pictured) announced greater flexibility in the way employees retiring with defined contribution (DC) pensions can take their savings.
In the future, DC members will be able to take their pension wealth as a lump sum, drawdown, or an annuity.
The number of small pension pots from which 100% lump sums can be taken has also been increased, from two to three.
Also, from 27 March, the amount a pension scheme member can drawdown each year will be increased from 120% to 150% of an equivalent annuity (that is, the amount an annuity would have paid out in that year).
In order to be allowed to ’drawdown’ from a pension, DC members will have to earn at least £12,000 a year. This is down from the current £20,000 a year income limit.
Further pension reforms announced in the Budget 2014 are set out in the government’s consultation, Freedom and choice in pensions.