Even though chancellor George Osborne stopped short of a full-scale pension overhaul in the recent Budget, there were a number of small, but important, 'tweaks' to the pensions regime you should take note of.
The pensions dashboard
The chancellor said that in 2019 a new digital platform would be launched to show details of an individual's entire pension portfolio. The move is popular, but could prove tricky to implement with "many outdated legacy systems still being operated by insurance companies and pension administrators alike", according to David Smith, director of financial planning at Tilney Bestinvest.
Workplace pensions advice allowance rise
Employers are generally unaware that the government has tried to encourage them to help employees obtain advice related to workplace pensions, by allowing a tax and National Insurance free allowance of up to £150 per employee for employer arranged advice. This allowance will be increased to £500 per employee from April 2017, which will hopefully enable lower-paid employees to access professional advice.
Pensions advice allowance
A new Pensions Advice Allowance has been proposed, which will allow people under the age of 55 to withdraw up to £500 tax-free from their defined contribution pension savings and use this towards the cost of financial advice. A consultation process is under way to determine this.
Changes to legislation for the seriously ill
Pension tax rules will be relaxed so that those who are seriously ill will be able to draw a lump sum from their pensions scheme, even if benefits are already being received. Any such payments made to those aged 75 or older will also be taxed as income rather than at the current flat rate of 45 per cent.
Under 23 drawdown income rule change
An inadvertent anomaly in pensions legislation resulted in minor dependants being prohibited from drawing an income from a drawdown pension when they reached the age of 23. They will now be allowed to continue drawing a pension income post age 23 like other minor beneficiaries.
Trivial commutation lump sums
It will be possible to take out such a lump sum from a defined contribution pension plan that is already in payment. This has not been allowed to date.
