Pensions changes ahead

The Government's plans for more pensions flexibility are starting to take shape. However, there are clearly worries about mis-selling and tax planning.

Following consultation, the changes to the pension regime, include:

• a permissive statutory override to ensure that all defined contribution schemes are able to offer their members increased flexibility;

• individuals will be able to transfer between defined contribution schemes, up to the point of retirement, if their scheme does not offer flexible access;

• a number of changes to the tax rules to allow providers greater freedom to create new products, including allowing annuities to decrease and allowing lump sums to be taken from annuities;

• new tax rules will be put in place to ensure that individuals do not use the new flexibilities to avoid tax by diverting their salary into their pension with tax relief and then immediately withdrawing 25% tax-free. Those who choose to draw down more than their tax-free lump sum from a defined contribution pension will be able to benefit from further tax-relieved pension saving, and make further tax-free contributions to a defined contribution pension, of up to £10,000 per year;

• increasing the minimum age at which people can access their private pension from 55 to 57 in 2028;

• the 55% tax charge on pension savings in a drawdown is too high and there will be a further announcement in the Autumn Statement;

• every individual with defined contribution pension savings will have a new right to free and impartial guidance at retirement, tailored to individuals' personal circumstances and provided by independent organisations that have no actual, or potential, conflict of interest, funded by a levy on regulated financial services firms; and

• continue to allow transfers from private sector defined benefit to defined contribution schemes, with appropriate safeguards. Transfers from unfunded public service defined benefit schemes should be banned.