On 17 July 2014, the current Finance Bill received Royal Assent to become the Finance Act 2014. Its key provisions are outlined below.
As a reminder, its key provisions are:
- pending major reforms coming into effect in April 2015, the maximum annual withdrawal cap for members who have opted for capped drawdown has been increased from 120 per cent to 150 per cent of a comparable annuity with retrospective effect from 27 March 2014. From the same date, the minimum income requirement for flexible drawdown has been decreased from £20,000 to £12,000;
- also from 27 March 2014, the maximum amount that a registered pension scheme can pay as a trivial commutation lump sum has been amended to allow trustees to commute a member's benefits, provided his total benefits in all registered pension schemes do not exceed £30,000. The commutation limit for a small lump sum has been increased from £2,000 to £10,000;
- the usual six-month deadline for taking a pension or annuity from a DC scheme after drawing a tax-free cash lump sum will be extended on an interim basis until the April 2015 reforms are in place. HMRC has produced updated guidance which applies where pension commencement lump sums are taken before 6 April 2015 and the associated pension is taken before 6 October 2015;
- HMRC is being given wider powers to combat pension liberation, including additional grounds on which registration can be refused, or schemes de-registered; and
- individual protection 2014 (IP 2014) is introduced. The deadline for applying for IP 2014 is 5 April 2017 and it gives individuals a personalised lifetime allowance (LTA) equal to the value of their pension savings on 5 April 2014, subject to an overall LTA of £1.5 million. From 18 August 2014, applications for IP 2014 may be made and HMRC has produced an online LTA assessment tool to enable individuals to check whether they need to apply.