In the Budget statement in March, the Chancellor announced a number of changes to defined contribution pensions that will introduce far greater choice for how people are able to fund later life.
This means that from April 2015, a person with a defined contribution pension, whatever its size, will be able to take it how they wish, subject to their marginal rate of income tax. A person will still be able to take their pension fund to purchase an annuity should they wish, but it will also give them the flexibility to access their money and invest or spend it as they wish.
Details of the proposed reforms can be found here and the consultation is open until 11 June 2014.
Charging for care and support needs is dependent on a financial assessment of a person’s capital and income. Currently any funds invested in an annuity or a capped or flexible drawdown pension are disregarded and only the income drawn from those products is taken into account in the financial assessment.
The Government is considering whether the current charging rules for care and support need to be updated, in light of the recently announced changes to the private pension system, to ensure they are fair, appropriate and sustainable. Views would be welcome on how the means test can appropriately take account of the new private pensions system.