Further to my earlier post on the huge pension changes announced by The Chancellor today, I thought it might be of use to our followers to see exactly what was said on this topic. And after that I have added my early thoughts on these changes.

The transcript of that section of the Budget speech is as follows:

“People who have worked hard and saved hard all their lives, and done the right thing, should be trusted with their own finances.

And that’s precisely what we will now do. Trust the people.

Some changes will take effect from next week.

We will:

• cut the income requirement for flexible drawdown from £20,000 to £12,000
• raise the capped drawdown limit from 120% to 150%
• increase the size of the lump sum small pot five-fold to £10,000
• and almost double the total pension savings you can take as a lump sum to £30,000

All of these changes will come into effect on 27 March.

These measures alone would amount to a radical change.

But they are only a step in the fundamental reform of the taxation of defined contribution pensions I want to see.

I am announcing today that we will legislate to remove all remaining tax restrictions on how pensioners have access to their pension pots.

Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want.

No caps. No drawdown limits.

Let me be clear. No one will have to buy an annuity.

And we’re going to introduce a new guarantee, enforced by law, that everyone who retires on these defined contribution pensions will be offered free, impartial, face-to-face advice on how to get the most from the choices they will now have.

Those who still want the certainty of an annuity, as many will, will be able to shop around for the best deal.

I am providing £20 million over the next two years to work with consumer groups and industry to develop this new right to advice.

When it comes to tax charges, it will still be possible to take a quarter of your pension pot tax free on retirement, as today.

But instead of the punitive 55% tax that exists now if you try to take the rest, anything else you take out of your pension will simply be taxed at normal marginal tax rates – as with any other income. So not a 55% tax but a 20% tax for most pensioners.

The OBR confirm that in the next fifteen years, as some people use these new freedoms to draw down their pensions, this tax cut will lead to an increase in tax receipts.

These major changes to the tax regime require a separate Act of Parliament – and we will have them in place for April next year.”

Taken together, these changes amount to one of the most significant shifts in the Defined Contribution (DC) pensions savings landscape for many years. They are likely to be welcomed by those approaching retirement, and may encourage many others to take a more active interest in saving for their old age.

But the key, as recognised in The Chancellor’s opening comments above, will be the trust in the consumer to make the right decisions regarding their retirement income (with or without advice).

And given that many of these changes will take place from next week, it may not be too long until we have some evidence either way on that one.

More to follow no doubt.

Best regards

Steve