The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
In his 2014 Budget speech the Chancellor made the following statement:
“We will completely change the tax treatment of defined contribution pensions to bring it into line with the modern world.”
He went on to say:
“Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want. No caps. No drawdown limits. Let me be clear. No one will have to buy an annuity.”
The effect of that statement was to change fundamentally the pensions benefits system in the UK.
Changes to the rules associated with drawdown, trivial commutation and small pots commutation from 27 March 2014, as described below, were interim steps to the reforms introduced from 6 April 2015.
Before April 2011, because of the tax treatment of the remaining fund on death (referred to as the ‘left over fund’) if a registered pension scheme member had not used his unsecured pension fund to buy an annuity by age 75 or later death (when a total tax burden of up to 82% could apply), this was regarded as being an effective compulsion to buy an annuity prior to that age.
The Government undertook to change this position and did so by introducing rules from 6 April 2011 which:
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