New Tax Rules Enable Pension Cash Back

Small pensions gained in a person's lifetime can now be turned into personal pension pots, rather than as income after retirement.

New rules issued by the Government will mean that around 25,000 people who have pension assets worth more than £18,000 will benefit from the new rules.

At present, the only pension schemes that can be cashed in rather than provide a regular income are occupational pension schemes with funds under £2,000.

The new rules will come into effect from April 2012 and will affect all those aged over 60.

According to a statement by HM Revenue & Customs the new ruling "will help individuals age 60 or over who have large pension savings", ie over £18,000.

It will not affect over 60s who have less than £18,000 in pension funds as they are already able to take a cash lump sum with a quarter of it tax-free.

At present those with savings above the £18,000 cut off point can only use 25 per cent to be turned into a cash lump sum which is tax-free. Any more must be used to provide an income, either an annuity providing a fixed sum for life or a slow yielding investment called a drawdown arrangement.

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