A radical shake-up of pension rules is expected to kick-start further changes to Britain’s individual savings options.
Radical changes to pension rules outlined in the Budget will allow savers to access their whole pension pot from age 55, negating the need for many to buy an annuity. The reforms, set to come into force next year, could have more knock-on effects, including the launch of new pension products and ring-fencing of savings to pay for care.
The introduction of the New ISA (Nisa) from the 1st July, which has a higher limit of £15,000, also means the differences between pensions and other kinds of savings maybe becoming blurred.
This has raised questions about whether there should be a single tax regime for both pensions and Nisa’s. Currently, full tax relief on pension savings is received on the way in, growth in the pension fund is tax-free and the money is taxed as income on the way out – although 25% of a pension pot can be taken tax free.
It is the reverse for Nisa’s, where money is saved from income that has already been taxed, growth is tax free, and all the money can be withdrawn tax free.
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