The Government has issued its response to the above consultation. The Northern Ireland Tax Committee of Chartered Accountants Ireland made a submission to this consultation in June. We reported on this consultation in the July 2014 issue of tax.point.

Draft legislation to enact these changes and “Pensions Flexibility 2015” guidance has also been published.

In its response to the consultation, the Government agreed with the Northern Ireland Tax Committee recommendation that no statutory override would be necessary. This recommendation was on the basis of the Irish experience from 1999 onwards which provided supporting evidence that a maximum statutory override is not needed to prevent the so called “Lamborghini” situation occurring. Therefore from next April, anyone aged 55 or over will have full flexibility when accessing their defined contribution (DC) pension pot.

Pleasingly the Government also agrees with the Northern Ireland Tax Committee that the 55% tax charge on pension savings in a drawdown account at death will be too high when the new system is established in 2015. The Government intends to announce changes to this at the Autumn Statement later in the year.

The consultation outcome also confirms that there will be no requirement to buy an annuity – members will be able to leave their funds invested and draw as much as they wish from the fund each year, taxed at their marginal rate and it will still be possible to take 25% of the fund as a tax-free lump sum.

Other aspects of the consultation outcome are as follows:

• Individuals will be able to access their defined contribution pension savings as they wish, subject to their marginal rate of income tax (rather than the current 55% charge for full withdrawal);
• As noted in the original consultation, DC scheme members will have the right to free, impartial guidance at retirement. However, this will now be provided by independent third parties such as the Pensions Advisory Service and the Money Advice Service in addition to some other bodies. The Financial Conduct Authority will be responsible for setting standards for the guidance;
• Transfers from private sector defined benefit (DB) schemes to DC schemes will still be possible (though it will not be possible to transfer from public sector unfunded DB schemes);
• Legislation will be introduced to reduce the annual allowance to £10,000 for those who have taken a flexible withdrawal under the new system; and
• The minimum pension age will rise to 57 in 2028 and will stay 10 years behind state pension age thereafter.