From April 2015, savers over 55 will be given the option of taking a number of smaller lump sums. This is why it will benefit you.
From next year savers will have freedom to do as much or as little as they want with their pension, George Osborne said before the publication of the taxation of pensions bill. But what do these freedoms mean in practice?
What is the main change?
Savers have always had the freedom to take 25% of their pension in a tax-free lump sum, but have then generally been herded into buying an annuity with all of the rest of the money. But from April 2015, savers over the age of 55 will be given the option of taking a number of smaller lump sums, instead of one single big lump sum, and in each case, 25% of the sum will be tax-free. However, as pension advisers are saying, this change was widely anticipated as an essential part of the new pension freedoms, and was actually already in place in the form of “phased retirement” or “vesting” under the old system.