On 3 December 2014, the Chancellor presented his Autumn Statement. The highlights, as far as pensions are concerned, were largely as previously announced.
It was confirmed that, from April 2015:
- pension savers will be able to access their defined contribution (DC) funds as they wish at age 55, subject to their marginal rate of income tax, instead of the current 55 per cent charge for full withdrawal;
- individuals will be permitted to pass on their unused DC savings to any nominated beneficiary when they die, instead of paying the 55 per cent tax charge which currently applies. If the individual dies before age 75, the beneficiary will pay no tax on the funds. If they die after age 75, the beneficiary will pay their marginal rate of income tax, or 45 per cent if the funds are taken as a lump sum. From April 2016, lump sum payments will also be taxed at the recipient’s marginal rate;
- the Government will introduce a reduced annual allowance of £10,000 for DC pension contributions for individuals who have flexibly accessed a pension from 6 April 2015;
- the Government will continue to allow transfers from funded DB schemes to DC schemes in the context of the new flexibilities;
- the small pots rules for withdrawals from DC pension savings from 6 April 2015 will continue to allow individuals to take up to three small pension pots from non-occupational schemes, or an unlimited number from occupational schemes, or up to £10,000 as a lump sum without being subject to a reduced annual allowance of £10,000. The age at which an individual can make use of these rules will be lowered from 60 to 55;
- there will be no change to the age limit at which tax relief can be claimed on pension contributions will remain at age 75; and
- in one additional announcement, beneficiaries of individuals who die under age 75 with a joint life or guaranteed term annuity will be able to receive any future payments from such policies tax free. The tax rules will also be changed to allow joint life annuities to be passed onto any beneficiary.
View the Autumn Statement documentation.