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Budget Pension Forecast

Written By On 18/03/2014

With Chancellor George Osborne ready to reveal his Budget strategy tomorrow, the British public hold their breath in anticipation.

Even though the Conservative and Libl Dems condemned Labour previously regarding pension reductions when they ruled Britain, the Coalition have continued in the same vein themselves.

Current rules allow a person to qualify to take their pension amount as a lump sum if: 'one of your pension pots is worth £2,000 or less', or if 'your total pension pots under all the schemes you belong to are worth £18,000 or less'.

Now that the Financial Conduct Authority have conducted their own research into the annuity market, they recognised that pension savers who have accumulated a small amount thus far, do not have a great deal to choose from, if they need to use their money as some source of income.

But a hint was given a few days ago that the chancellor may ease the present regulations for smaller pension pots.

It is anticipated that these changes might allow savers with pension pots of under £15,000 to take them as a lump sum. Twenty five per cent of that would be tax free.

That would prove to be great news for people approaching their retirement with financial responsibilities.

Malcolm McLean, of Barnett Waddingham consultancy services commented:

I wouldn't rule out the possibility of a cap being placed on the level of the pension commencement tax free lump sum although I would not support such a move.

Last year's Autumn Statement saw the Chancellor introduce a new National Insurance class fashioned for those expecting to retire by 1st April 2016 .

That is when the new single-tier state pension will come into existence. This will allow retired people to make extra contributions to the state pension in order to receive an extra annual income of up £1,300.

But the nation is still awaiting to hear how much the contributions will cost. But this is something else that is expected to be delivered in tomorrow's Budget.