Pension reforms

[tut]

Quite clever of Osborne to make these changes. Those that have not read the details will think that it is fantastic, I can take the whole lot out and do what I want with it.

Of course they can, but they only get the first 25% tax free, so out of a pension pot of £100K which is not large over 40 years, they take £25K, they probably have a State Pension so are using part of their tax allowance anyway, so on the remaining £75K they will pay 20% tax on part of it, and 40% on most of it.

Which is a good thing because the part sensible ones will then go out and buy the new car, holiday, white goods, etc which creates more tax revenue and jobs, the sensible ones will buy the best annuity they can get, and the rest of the great unwashed will spend it on fags, booze, and better grade drugs.

tut

[cla5h]

Tut,

There might be a few that withdraw the whole lot and blow it, but for the majority - if they've been sensible enough to save via a pension over their working life, it's unlikely they'd be the type to fritter it away.

Of the 'part-sensible ones', I doubt many will take the full pot in a oner. Most will ensure they remain within the basic rate tax band by limiting how much they take each year. And they can't complain about being taxed on it as they got tax relief on their contributions.

Like you, I reckon the 'sensible' ones will still buy an annuity, for the security that gives them. But it's good that there is now some flexibility for those with a greater appetite for risk (e.g. withdraw an amount each year, remaining below higher rate band, and re-invest, e.g. via ISA) to hopefully give a better return than an annuity.

[campbell]

I believe the increased choice is a good thing.