When the government implemented radical new pension freedoms a year ago, it was the most fundamental reform to the system in almost a century. And, like so many eye-catching changes, it was given a political spin. ‘Freedom and choice in pensions’ was how it became known. Sounds good, doesn’t it?
It’s hard to argue with words like ‘freedom’ and ‘choice’, but there were plenty of people who doubted the efficacy of the new regime. Put simply, ministers abolished the requirement to buy an annuity and introduced new ways to access pension savings.
As in the past, pension holders can still take 25 per cent of their pension pot as a lump sum. Under the new rules, those aged 55 and over can now take the whole amount as a lump sum, paying no tax on the first quarter and the rest taxed as if it were a salary at their income tax rate.
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