The Chancellor estimates 320,000 people a year. They are a relatively specific group of people being those who have retired and have taken pension but have not bought an annuity but are drawing out directly from the pension known as “in drawdown”.
This is only tax-free if kept as a pension otherwise it will be subject to marginal tax. If those who inherit the funds want or need to spend the money, e.g. children or grandchildren they will just have to pay tax at their marginal rate on any amounts taken out so the government is not losing out completely.
The changes announced in the Budget this year allowing people to take out their pensions some would say too soon. This change will encourage people to leave their money in the pension wrapper whilst drawing down on the funds and not having to buy an annuity.
Everyone seems to be a winner – except the annuity business.
