This Statement confirmed radical changes to the pension tax regime. Some of these appear to be subject to all Party agreement - but others remain controversial. The result is that pension schemes are reinforced as the most flexible and tax efficient savings "cupboard" for an individual and for those who benefit on his/her death.
The governing legislation for the new changes is contained in the Taxation of Pensions Bill, currently before Parliament. This is intended to be enacted early in 2015 and is scheduled to come into effect on 6th April 2015. (Clearly if this Bill did not pass, as currently drafted, The Chancellor’s Statement will be negated and our conclusions and comments will alter!)
The principal changes that are being introduced may be summarised simply as follows:
- Additional drawing flexibility for members of SSASs, SIPPs and some other money purchase schemes with unrestricted access to all funds – subject to Income Tax.
- Dramatic reductions in the tax on death benefits from such schemes – including a fall to zero tax in some circumstances.
- Considerably increased flexibility in distributing death benefits – with the new option of leaving a continuing tax exempt pension fund to all desired beneficiaries - not just “financial dependants”.
- The chance to pay pension contributions when in Flexible Drawdown - but reduced maximum contributions in drawdown, where this commences after 5th April 2015.
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