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Budget 2014: Osborne announces "radical" changes to pensions

19 March 2014

Image for Budget 2014: Osborne announces "radical" changes to pensions

Chancellor George Osborne announced a set of changes to pensions in this year's Budget to make saving more of an attractive option.

As he delivered his speech, he said: "Support for savers is at the centre of this budget."

There is set to be an overhaul in the rules for defined contribution (DC) pensions so that they are more flexible, as "a step" towards a "radical change" in pensions.

From 27 March the income requirement for flexible drawdown will be cut from £20,000 to £12,000, and the total pension savings you can take as a lump sum will almost double to £30,000.

Osborne said: "We will legislate to remove all remaining tax restrictions on how pensioners have access to their pension pots.

"Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want. No caps. No drawdown limits. Let me be clear. No one will have to buy an annuity."

Furthermore, everyone retiring on a DC scheme will be offered face-to-face advice when they retire so that they can get the most of the choices available to them.

Osborne said that the Government will work with the industry to develop the 'right to advice' idea.

As part of his "radical changes" to the pensions system, from July this year the annual ISA limit will increase to £15,000 and cash and stocks and shares ISAs will be merged into one new ISA.

This is part of his plan to increase the "simplicity, flexibility and generosity" of ISAs.

New pensioner saving bonds will be introduced for the over 65s. Osborne said that up to £10bn of these bonds will be issued and a maximum of £10,000 can be saved in each bond. The exact rates of these bonds will be set this autumn.

Osborne also announced that the 10 pence starting rate for income from savings will be abolished for savers altogether, as it is "complex to levy" and it "penalises low income savers".

Osborne's message to savers was this: "You have earned it, you have saved it and this Government is on your side."

First published 19.03.2014

monique_simpson@wilmington.co.uk