Today’s budget saw the Chancellor tinker around the margins of the pensions system.
Having backed down on his widely-rumoured plans to cut tax relief on contributions, the Chancellor instead announced “Lifetime ISAs” which will be launched in April 2017 and which will effectively act as secondary pensions saving accounts which can be opened by anyone under age 40. For every £4 saved prior to the age of 50, the government will contribute a further £1.
Funds of up to £450,000 can be used to buy a first home. Funds (including the government bonus) can also be withdrawn from age 60 for use in retirement.
The government has recognised that pensions savings can be confusing, with many savers accruing a number of small pension pots across the course of their working lives. It has committed to launching a “pensions dashboard” by 2019, to enable individuals to view all their pension savings in one place.
To promote sound financial choices, the government will consult on introducing a pensions advice allowance which will allow individuals to withdraw up to £500 from their pension fund to pay for financial advice relating to pensions.
Finally, the government will introduce a number of technical amendments to support pensions flexibility, including aligning the tax treatment of ill health lump sums with death benefits, allowing defined contribution pensions which are being paid to be commuted into cash sums where they are below £30,000, and making top ups for dependents’ death benefit authorised payments.