The 2015 Budget, delivered by George Osborne on 18 March 2015, included further proposed changes to pensions. We understand that the following changes will be subject to a period of consultation before they are implemented.
Cashing in annuities
individuals who previously retired from DC arrangements and purchased an annuity from an insurance company will be able to cash in their annuity policy for either a single cash lump sum or a series of cash payments. The cash payment(s) received will be subject to tax at the individual’s marginal rate.
Before this proposal can be implemented significant work is required not least to agree how the cash value of individual annuities will be calculated. In addition, George Osborne has promised that individuals will have access to advice.
The Lifetime Allowance (‘LTA’) places a limit on the total value of the pension benefits you can receive at retirement from all approved arrangements. Any benefits above the Lifetime Allowance may be subject to a penal rate of tax.
The Chancellor announced plans to reduce the current LTA from £1.25m to £1.0m from April 2016. He also confirmed that individuals with benefits worth more than £1m will be able to protect the value of their benefits up to the current limit of £1.25m. Guidance on how to obtain this protection will be issued by HMRC in due course.
If implemented, this change will affect a number of Scheme members. The Trustees will provide more information on the new LTA when it becomes available. You may also wish to speak to an independent financial adviser.
The Annual Allowance of £40,000 is unchanged.
The Government also confirmed that additional funding of £19.5 million will be provided in 2015/16 to support the new pension freedoms and the new pensions guidance service, Pension Wise.