On 6 April 2015 the Government will introduce a raft of new legislation which will transform the pensions landscape significantly. Among the changes are new pension flexibilities which will primarily affect the way defined contribution (DC) pension benefits can be drawn.

These freedoms apply to individuals with DC savings in a money purchase scheme and members of cash balance arrangements. It also includes a member with money purchase AVCs or money purchase benefits under a hybrid scheme, depending on the scheme rules.

From the age of 55, members will be able to choose one or more of the following options:

  • Flexi-access drawdown – allowing individuals to take a taxable income when they want in whatever quantities
  • Uncrystalised funds pension lump sum – allowing members to take one or more lump sums from uncrystalised funds and either re-invest or spend these
  • The purchase of a lifetime annuity
  • Taking a scheme pension (if option is available).

Those already in flexible drawdown will automatically convert to flexi-access drawdown. Those with capped drawdown will be able to choose whether to convert to flexi-access drawdown or remain subject to their existing capped drawdown regime.

Following implementation, individuals will still be able to transfer from a defined benefit (DB) scheme to a DC arrangement provided they obtain independent advice from an FCA authorised financial advisor. The DB scheme trustees must be satisfied that advice has been taken but they are not required to evaluate it.