Pension reforms: Treasury to announce further changes

People will be allowed to take lump sums out of their pension pots throughout retirement under a further liberalisation of the industry to be announced on Monday.

Currently, pensioners must decide at the time of retirement whether to take a tax-free lump sum of up to 25 per cent of the value of their pension pot. But under changes to tax rules to be announced by the Treasury, similar deals will be available in future, allowing cash sums to be taken out later to meet sudden needs as they arise.

Ministers are also expected to announce a reform of annuities so that they can continue to pay out after death, to avoid all income being lost to the family of a deceased policyholder. Currently income from annuities is guaranteed for a maximum of only 10 years. Under the Treasury plan, the 10-year cap will be dropped and the annuity provider will be able to pay out for longer, although income rates would depend on the length of the guarantee.

Some pension experts have predicted the plans will backfire and that those who cash in their savings will be left more dependent on the state later in life.

Independent Partners; get a free factsheet on 2014 pension rules changes from Hargreaves Lansdown