Pensions are vital for everybody because when they become older and unable to work, they’ll rely on their pension to get buy now there’s no income. Unfortunately, sometimes people need to make a mis-sold pension claim after being given misleading or inaccurate information that leaves them in a bad financial position. It’s thought that this comes from people’s lack of knowledge when it comes to pension schemes, meaning people can easily take advantage. With this being said, in the budget speech today, the chancellor of the exchequer, George Osborne, stated that there would be changes to the pension system in the coming years. The chancellor is currently considering a green paper which has proposals for the changes in the pension system. The green paper can be found here : “https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442160/Strengthening_the_incentive_to_save_consultation__web_.pdf”
Osborne stated the following in his speech:
“While we have taken important steps with our new single tier pension and generous new Isa, I’m open to further radical change. Pensions could be treated like Isas – you pay in from taxed income and it’s tax-free when you take it out, and in between it receives a top-up from the government.”
“This idea and others like it need careful and public consideration before we take any steps so I am today publishing a green paper that asks questions, invites views and takes care not to pre-judge the answer.”
This essentially means:
- Pensions will become more like ISAs. You pay into a pension with after tax income and you can withdraw money from your pension tax free. ( Currently you pay into a pension with before tax money and you are only taxed when you withdraw the money).
- Whilst a pension will become more like an ISA, you will still receive a pension top up from the government. (the amount of top up is still waiting to be seen, could possibly be a standard rate as opposed to the current tiered rate)
- These are big changes to the pension system and it is still unsure if the pension industry is ready for a radical change after the changes implemented in the previous budgets.