“The most fundamental change in the way people access their pension in almost a century” has been announced by the Chancellor of the Exchequer, George Osborne, in his Budget speech.
The Chancellor announced that, from April 2015, people will be able to access their defined contribution pension savings as they wish during retirement, subject to their marginal rate of income tax. The 25% tax free lump sum will continue to be available.
Alongside this, the government is introducing a new requirement for pension providers to make sure that everyone retiring with a defined contribution pension pot receives free and impartial face-to-face guidance on the choices they have.
In the meantime, from 27 March 2014:
• The overall limit for a ‘trivial commutation’ lump sum is increased from £18,000 to £30,000;
• The individual pot limit for commutation as a ‘small’ lump sum is increased from £2,000 to £10,000. The number of personal pension pots that can be taken this way is also increased from two to three;
• The maximum income available from a ‘capped drawdown’ arrangement is increased from 120% to 150% of an equivalent annuity;
• The guaranteed income needed be able to access ‘flexible drawdown’ is reduced from £20,000 per year to £12,000 per year.
The consultation on the 2015 changes closes on 11 June 2014 and can be found at www.gov.uk/government/consultations/freedom-and-choice-in-pensions.
Rise in workplace pension saving
Latest figures from the Office for National Statistics (ONS) show that participation in workplace pensions increased in 2013 for the first time since 2006. The rise was also the largest since records began in 1997.
50% of all employees belonged to a pension scheme compared to 47% the previous year. The proportions were 85% in the public sector and 36% in the private sector.
In the private sector, 51% of employees in the largest companies (those with over 5,000 employees) were members of a scheme, a jump from 36% in 2012.
The data was collected in April 2013 when only 500,000 people had been automatically enrolled. This figure has now risen to over 3 million.
The Department for Work and Pension has announced that Mark Boyle will be the new Chair of the Pensions Regulator from 1 April 2014 replacing Michael O’Higgins. Mr Boyle is currently the independent Non-Executive Chairman of HM Land Registry.
Separately, HM Treasury has announced that Martin Clarke has been appointed as the new Government Actuary. He is currently Executive Director of Financial Risk at the Pension Protection Fund (PPF).
Members of the Lloyds Bank pension scheme are to have their pensionable salaries frozen at April 2014 levels which will reduce the scheme’s liabilities by around £1bn. Affected workers will receive a lump sum payment worth 3% of salary.
The GKN Group Pension Scheme has insured £123m of pensioner liabilities with Rothesay Life, who recently announced an agreement to acquire MetLife’s £3bn UK bulk annuity portfolio. Rothesay Life is jointly owned by Goldman Sachs, Blackstone, GIC and MassMutual.
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