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George Osborne: use your pension as a bank account
Chancellor tells savers they can withdraw 'as much or as little as they want' from their pension
Mr Osborne highlighted how people will be able to take small amounts from their pension pots Photo: PA
By Steven Swinford, and Dan Hyde
10:36PM BST 13 Oct 2014
303 Comments
Workers will be able to use their pension pots like bank accounts from the age of 55 and withdraw thousands of pounds to save, invest or spend as they wish on holidays or other purchases.
George Osborne, the Chancellor, said that people would be able to take advantage of the Government’s flagship pension reforms to access “as much or as little as they want” from their savings.
Under the reforms those approaching retirement and pensioners will be able to dip into the retirement funds whenever they want. The first 25 per cent withdrawn will not be taxed, while the rest will be taxed at the individual’s marginal rate.
The move builds on the pension reforms Mr Osborne announced in his Budget, under which he scrapped rules that force most Britons to use their pension savings to buy an annuity.
At the time, ministers emphasised that pensioners would be able to draw down the entirety of their pension pots to save, invest in property or even buy a Lamborghini.
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However, Mr Osborne highlighted on Monday how the pension reforms will give people the ability to take small amounts from their pension pots at a time of their choosing.
The announcement was made as the Government publishes its landmark pensions reform Bill in the House of Commons today.
Mr Osborne said: “People who have worked and saved all their lives will be able to access as much or as little of their defined contribution pension as they want from next year and pass on their hard-earned pensions to their families tax free.
“For some people an annuity will be the right choice whereas others might want to take their whole tax-free lump sum and convert the rest to draw-down. We’ve extended the choices even further by offering people the option of taking a number of smaller lump sums, instead of one single big lump sum.”
Ros Altmann, the Government’s older people’s tsar, said: “It means people can use their pensions as a bank account. People will be free to access their money freely as they need to, rather than being forced to buy particular products.”
However, Ms Altmann added that most pension companies do not make it easy for pensioners to withdraw their pensions. She urged them to accept the Government’s pension reforms and give people greater freedoms.
She said: “Most pension companies are not ensuring that their customers can take money out flexibly. I call on the industry to make sure that people can really benefit from the new pension changes as quickly as possible.’’
Under the current rules, savers have few options in their retirement. They can use their pension pot to buy an annuity, which provides a fixed income but has been heavily criticised for offering people a poor return on their investment.
The alternative is to convert their pension pot into a “draw-down” policy, where money is invested in the stock market and pensioners take a regular income. For all but the very wealthiest savers, any withdrawals are capped at around £9,000 a year from each £100,000 in the fund, and subject to onerous fees.
From next April, the Government will enable workers to keep their pension pots when they retire and take small sums of money whenever they choose, taxed at their marginal rate after the first 25 per cent.
The Government said that the move would allow pensioners to access their money without the costs associated with a draw-down pension and significantly lower their tax bills over the course of their retirement.
Earlier this year Steve Webb, the pensions minister, said that he would be “relaxed” if pensioners chose to buy a Lamborghini with their life savings.
Critics have questioned whether people could end up struggling financially if they spend all their money after retiring.
Mr Webb, a Liberal Democrat, said that the Government’s state pension meant that elderly people will always have a safety net even if they spend the majority of their savings.
He said: “One of the reasons we can be more relaxed about how people use their own money — and as a Liberal Democrat I want to give people those sorts of freedoms — is that with the state pension coming in, the state pension takes people above those sorts of means tests. So actually, if people do get a Lamborghini, and end up on the state pension, the state is much less concerned about that, and that is their choice.”
Mr Osborne announced during the Conservative Party conference earlier this month that hundreds of thousands of pensioners will be able to leave more of their own money to their children under government plans to cut “penal” death taxes on pensions.
Chancellor tells savers they can withdraw 'as much or as little as they want' from their pension
Mr Osborne highlighted how people will be able to take small amounts from their pension pots Photo: PABy Steven Swinford, and Dan Hyde
10:36PM BST 13 Oct 2014
303 Comments Workers will be able to use their pension pots like bank accounts from the age of 55 and withdraw thousands of pounds to save, invest or spend as they wish on holidays or other purchases.
George Osborne, the Chancellor, said that people would be able to take advantage of the Government’s flagship pension reforms to access “as much or as little as they want” from their savings.
Under the reforms those approaching retirement and pensioners will be able to dip into the retirement funds whenever they want. The first 25 per cent withdrawn will not be taxed, while the rest will be taxed at the individual’s marginal rate.
At the time, ministers emphasised that pensioners would be able to draw down the entirety of their pension pots to save, invest in property or even buy a Lamborghini.
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However, Mr Osborne highlighted on Monday how the pension reforms will give people the ability to take small amounts from their pension pots at a time of their choosing.
The announcement was made as the Government publishes its landmark pensions reform Bill in the House of Commons today.
Mr Osborne said: “People who have worked and saved all their lives will be able to access as much or as little of their defined contribution pension as they want from next year and pass on their hard-earned pensions to their families tax free.
“For some people an annuity will be the right choice whereas others might want to take their whole tax-free lump sum and convert the rest to draw-down. We’ve extended the choices even further by offering people the option of taking a number of smaller lump sums, instead of one single big lump sum.”
Ros Altmann, the Government’s older people’s tsar, said: “It means people can use their pensions as a bank account. People will be free to access their money freely as they need to, rather than being forced to buy particular products.”
However, Ms Altmann added that most pension companies do not make it easy for pensioners to withdraw their pensions. She urged them to accept the Government’s pension reforms and give people greater freedoms.
She said: “Most pension companies are not ensuring that their customers can take money out flexibly. I call on the industry to make sure that people can really benefit from the new pension changes as quickly as possible.’’
Under the current rules, savers have few options in their retirement. They can use their pension pot to buy an annuity, which provides a fixed income but has been heavily criticised for offering people a poor return on their investment.
The alternative is to convert their pension pot into a “draw-down” policy, where money is invested in the stock market and pensioners take a regular income. For all but the very wealthiest savers, any withdrawals are capped at around £9,000 a year from each £100,000 in the fund, and subject to onerous fees.
From next April, the Government will enable workers to keep their pension pots when they retire and take small sums of money whenever they choose, taxed at their marginal rate after the first 25 per cent.
The Government said that the move would allow pensioners to access their money without the costs associated with a draw-down pension and significantly lower their tax bills over the course of their retirement.
Earlier this year Steve Webb, the pensions minister, said that he would be “relaxed” if pensioners chose to buy a Lamborghini with their life savings.
Critics have questioned whether people could end up struggling financially if they spend all their money after retiring.
Mr Webb, a Liberal Democrat, said that the Government’s state pension meant that elderly people will always have a safety net even if they spend the majority of their savings.
He said: “One of the reasons we can be more relaxed about how people use their own money — and as a Liberal Democrat I want to give people those sorts of freedoms — is that with the state pension coming in, the state pension takes people above those sorts of means tests. So actually, if people do get a Lamborghini, and end up on the state pension, the state is much less concerned about that, and that is their choice.”
Mr Osborne announced during the Conservative Party conference earlier this month that hundreds of thousands of pensioners will be able to leave more of their own money to their children under government plans to cut “penal” death taxes on pensions.
It's time to smash all the little pension funds and build one, massive UK-wide one Photo: PA
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