In what could be a huge blow to annuity providers, from April next year anyone who is aged 55 or over will be able to take their entire pension fund as cash – although only the first 25% will be tax-free - in a move he says will allow pensioners the access to their own cash.
He also announced that the income requirement for flexible drawdown has been cut from £20,000 to £12,000 and the capped drawdown limit has been raised from 120% to 150%.
Osborne said:
"Most people still have little option but to take out an annuity, even though annuity rates have fallen by a half over the last 15 years. The tax rules around these pensions are a manifestation of a patronising view that pensioners can’t be trusted with their own pension pots. I reject that.
"People who have worked hard and saved hard all their lives, and done the right thing, should be trusted with their own finances. And that’s precisely what we will now do. Trust the people."
MGM Advantage technical director Andrew Tully says:
“This is an unprecedented change giving huge flexibility to how pensions are taken. We need to make sure people get help in working out the best way to take a tax efficient and sustainable income.”
Some changes will take effect from next week.
And we’re going to introduce a new guarantee, enforced by law, that everyone who retires on these defined contribution pensions will be offered free, impartial, face-to-face advice on how to get the most from the choices they will now have.
Those who still want the certainty of an annuity, as many will, will be able to shop around for the best deal.
I am providing £20 million over the next two years to work with consumer groups and industry to develop this new right to advice.
