Pensions - Articles - Pension reforms still need time to bed in ahead of Budget

 Andy James, head of retirement planning, Towry expresses his hopes and fears for retirees ahead of next month’s Budget

 “We were pleased to see that there were minimal changes to pensions in December’s Autumn Statement. This Parliament has already created ground-breaking new legislature such as the simplified flat-rate state pension and the introduction of auto-enrolment, and these policies still need time to bed in.

 “The major parties have already suggested they will support the extension of the triple-lock guarantee – which says the basic state pension will annually rise by inflation, average earnings or 2.5 per cent – beyond this Parliament¹. It will be good news for pensioners if this is confirmed during this year’s Budget.

 “Bad news for higher saving pensioners could be on its way, however. The Government is being pressurised by some to reduce the £1.25m lifetime allowance yet further, particularly in regard to the 25% (£312,500) of this that can be taken as a cash sum tax-free.

 “At current annuity rates, a £1.25m pension fund would only initially provide an individual with around £40,000 per year in terms of a rising retirement income2. However, if you have individual protection on your pension savings, you will be able to maintain a personalised lifetime allowance of the value of your pension savings up to £1.5m. In order to be covered by individual protection, you must have applied to HM Revenue & Customs by April 5th.”