The Finance Bill 2010 will enable those with pensions to defer receiving payments beyond the age of 75.
In order to reduce the amount of people relying on a state pension once their savings have run out, pensioners with a minimum lifetime income of £20,000 will also be able to draw as much as they want from a defined contribution pension pot.
However, very few people will be affected by the changes because of the amount of money needed to qualify, according to Craig Harrison, wealth management consultant at Creative Benefit Solutions.
"To the layman the headline grabbing news will be that they can potentially gain access to all of their funds (albeit subject to income tax) once they have secured a pension income of £20,000 per annum." Harrison said. "However to provide a pension income of this level (assuming from private plans) is pretty good going and requires an average fund in the region of £300k."
The decision is likely to cause significant movement around pension provision in workplaces, according to Pricewaterhouse Coopers, who welcomed the end to uncertainty over retirement rules. However, Ed Wilson, PwC pension adviser, called for more reform: "Although the scope for tax-efficient pensions savings has been significantly reduced, pension schemes remain one of the most effective savings vehicles an individual can have.
"Greater flexibility is needed to enable employer and individual savings to be integrated with the key issues facing many people of debt management throughout their working lives, as well as the need for income in retirement," Wilson said. "We'd also like to see employees being able to access their pension savings early in particular circumstances, such as to avoid losing a home to repossession."
Will Aitken, a senior consultant at Towers Watson, said that changes were needed because of the numbers of the increased earning potential of women. "The rules have been designed for a world where more women are building up pensions of their own, rather than relying on their husbands," Aiken said. "Where this is not the case, if couples buy less ‘safe’ annuities so they can access more cash, they will have to manage the large sums of money they withdraw carefully."
