The new financial year, from 6th April, marks the largest overhaul of the pensions system in almost a century, giving people the freedom to take control of their own pension.
- 300,000 individuals a year with defined contribution pension savings will be able to access them as they wish when they turn 55 – subject to their marginal rate of tax.
- Announced in the Budget in 2014, these changes were driven by the Liberal Democrat pensions Minister Steve Webb, who has overseen a liberal revolution in the British pensions system.
The big change in the new private pension freedoms will mean people no longer have to buy an annuity from their pension pot. This provides a safety net with regular payments, however, in recent years annuities have been poor, and pensions were very inflexible in access for example in helping children get on the property ladder or even just paying off individual debts.
Previous pension changes under Steve Webb have included:
- The ‘triple lock guarantee’ for state pensions, a Lib Dem policy, so they will rise by the higher of earnings growth, price inflation or 2.5%. The full basic state pension is now £950 per year higher than in 2010 in cash terms.
- Guarantee 9m people a workplace pension, which their employers and the government pay in to, giving everyone the confidence to save.
- A new simple, single state pension to help people save for a better retirement.
- Abolished the default retirement age-making it illegal for people to be sacked simply because they became a pensioner.
- Authored the freedoms announced at the budget to allow people with annuities the freedom to sell on their existing annuity.
The pensions revolution has been truly significant for this and future generations. We’ve restored the link to earnings which Thatcher broke, and Labour never changed in 13 years of Government. State pensions will be simpler going forward and not penalising those who have given up work to look after their children. More people will now have a private pension as a result of the changes we’ve made to “auto enrolment” into workplace pensions.
These are changes which have long been overdue and I’m glad that the Liberal Democrats have had the chance in the past 5 years to implement them.