close menu

Budget Speech 2014: Pension pot reforms

by Mike Abbott | Apr 14, 2014
  • In his 2014 Budget Speech, George Osborne announced a radical reform that considerably increased the flexibility for pension savers on retirement. In the words of Osborne himself, “No one will have to buy an annuity anymore.”

    This is significant and demonstrates that the Chancellor has learned from the lessons in 2009 when thousands of pensioners saw their pension pots reduced in value as financial markets crashed, only to be forced to them by an annuity at the lowest annuity rates in record as interest rates fell to the floor. The understanding for the need to provide flexibility at this juncture in the financial life cycle has reached the political consensus. 

    These reforms remove one of the last remaining obstacles we face as advisers in convincing people of the value of pension saving. Lack of flexibility on taking income at retirement has put many people off pension saving; as a consequence, these people are losing out on the considerable benefits of tax-free growth and income tax relief that pensions provide. Retirees haven’t had to buy an annuity for some time now, but they have been capped on how much they could draw out of their pensions. 

    As of April 2015, retirees now have the option to take the pot in its entirety, as long as they pay a marginal income tax rate when they withdraw the funds. They can still withdraw a quarter of their pension pots tax-free upon retirement, with the rest being taxed at normal marginal tax rates – the same as any other income. It’s also worth remembering that pensioners over 65 have income tax allowances, so they pay slightly less tax for a given amount of income than a younger person. 

    Chancellor Osborne regards this reform as the biggest to affect pensions since 1921, and one that will address the perception that easy access equates to reckless spending. “13 million people have defined contribution schemes, but most people still have little option but to take out an annuity, even though annuity rates have fallen by a half over the last 15 years. The tax rules around these pensions are a manifestation of a patronising view that pensioners can’t be trusted with their own pension pots,” says Osborne.

    According to Osborne, “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.”

    For more information on the topics covered in this post, or for any other wealth-related queries, you can contact us on +44 (0) 20 7759 7519 or email our wealth team.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

    • Man cutting coin with table saw
      10 cost saving ideas for your small business
      Nov 20, 2019  |  by Scott Brown
    • Confused businessman
      Hiring your first employee for your UK business? This is how much it costs
      Oct 31, 2019  |  by Scott Brown
    • business plan
      Step-by-step guide to writing a business plan [template included]
      Aug 29, 2019  |  by Scott Brown
    • female-entrepreneur hot air balloon
      Why we need more women-owned businesses
      Jul 16, 2019  |  by Scott Brown
    • crowdfunding lightbulb
      7 ways to finance your small business
      Jul 16, 2019  |  by Scott Brown
    • Businessman looking to the future
      How to get your business ready for the future
      Jun 19, 2019  |  by Scott Brown
    • Guide to UK PAYE tax forms
      A guide to UK PAYE tax forms P45, P60 and P11D
      Jun 14, 2019  |  by Kobus Van den Bergh
    • Cut-taxes
      The 2019/20 tax year changes: What they mean for you
      Jun 10, 2019  |  by Scott Brown
    • confused
      Do you need to complete a Self Assessment tax return?
      May 29, 2019  |  by Kobus Van den Bergh
    • Tax refund money
      11 excellent ways to spend your UK tax refund
      Apr 09, 2019  |  by Kobus Van den Bergh

    South Africa

    Cape Town

    Regent Square
    Doncaster Road
    Kenilworth 7708 +27 (0) 21 657 2120


    25 Richefond Circle
    Umhlanga 4320 +27 (0) 31 536 8844

    United Kingdom


    One Croydon
    12-16 Addiscombe Road
    Croydon CR0 0XT +44 (0) 20 7759 7514



    9 Yarra Street
    South Yarra
    VIC 3141 +613 (0) 8651 4500

    Sable International is a trading name of 1st Contact Money Limited (company number 07070528), registered in England and Wales. We are authorised and regulated by the Financial Conduct Authority in the UK (FCA no. 517570), the Financial Services Conduct Authority in South Africa (1st Contact Money [PTY] Ltd - FSP no. 41900) and hold an Australian Financial Services Licence issued by ASIC to deal in foreign exchange (1st Contact Group - AFS Licence number 335 126).

    We use cookies to provide the best website experience for you. Using this website means that you agree to this. How we use cookies.