Former pensions minister, Steve Webb, caused a stir at the weekend when suggesting an end to the tax-free lump sum that can be be taken from pensions may be announced in the Budget on March 16th.
The comments have led to confusion, with many individuals with pension pots evaluating whether to take their 25% tax free-lump sums now, rather than risk being adversely affected by changes to the rules next month.
The former minister later clarified his statement, suggesting that any changes to the pension rules are most likely to impact future saving systems rather than pension money already accrued.
Many pension experts also predict that if changes are about to be unveiled, it is highly unlikely the Chancellor will target existing policies, however, the landscape going forwards may differ somewhat.
Katie Morley, writing in her Telegraph article this week, suggests that; “Rather than rushing to grab your tax-free cash now, if you’re going to take any action it ought to be topping up your pension under the current system which does allow you to receive valuable tax relief and ‘build up’ tax free cash. Contributing the same money to pensions in the new system, or if they scrap higher rates of tax relief (which is more likely), it may suddenly look much less attractive.”
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