HM Revenue & Customs (HMRC) has revealed that around one third of eligible retirees will take cash out of their pension pot from April 2015 under new flexibility rules. Around 400,000 people will have the chance to take the money initially and about 130,000 will do so, according to the taxman.
The Revenue’s Policy Impact Document entitled Pension Flexibility 2015 describes the background to the changes, the changes themselves and the Government’s objectives in making them.
Currently, most people in defined contribution (DC) scheme, where the final pension depends on the amount of investment returns, buy an annuity from a provider when they retire. However, from April next year, people from the age of 55 will be able to take the cash and do what they want with it, although only 25 per cent of the pot can be taken tax-free
There have been concerns that some people will blow the lot on fast living in their remaining years but a survey by Saga suggests that this will not be the case.
According to the poll of 2,400 people aged over 50, only 15 per cent said they planned to cash in their full pension pot, while over half said they planned to use the funds to secure a future income for their retirement.
However, the organisation joined the chorus asking the Government to supply good guidance and advice for people once the new rules come into effect, otherwise some may do something they live to regret.
HMRC’s impact document confirms figures published in the Budget, estimating that the extra tax revenue going to the Treasury totalled £320m in 2015-16, rising to £1.2bn in 2018-19.
