Retirees who recently took a tax-free lump sum from their defined contribution (DC) pension will be given 18 months to decide what to do with the rest of their savings following the far-reaching changes to pensions announced at Budget 2014, the government confirmed on Wednesday.
It said the extension - from six months - means retirees "will not be put at a disadvantage should they wish to wait to access their pension savings more flexibly".
It follows an announcement on 27 March that the government would take action to ensure people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next, instead of buying a lifetime annuity.
Under current tax rules, once a tax free lump sum has been taken, individuals have six months before they are required to make a decision regarding their pension, either by buying an annuity or entering into capped drawdown.
Currently, if this is not done, the lump sum is then taxed at 55%.
Budget 2014 delivered a surprise overhaul of retirees' ability to access their retirement savings.
Retirees, who historically tended to buy an annuity from their existing pension provider, will now be able to take all their pension savings as a lump sum, draw them down over time, or buy an annuity.
Additionally, the government reduced the amount of guaranteed income people need in retirement to access their savings flexibly, from £20,000 to 12,000, and increased the amount of total pension savings that can be taken as a lump sum, from £18,000 to £30,000.
Moreover, it increased the capped drawdown withdrawal limit from 120% to 150% of an equivalent annuity.
Exchequer secretary to the Treasury David Gauke said: "At Budget the government announced the most fundamental change in the way that people access their pension in almost a century, ensuring that over 400,000 people who have worked and saved hard will be able to access their retirement savings more flexibly.
"However, we recognise that decisions people take regarding their pensions are important and take time. This extension to the decision making period will give people the opportunity to take full advantage of the new flexibilities introduced at the Budget."
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