Pension changes: what they mean for you

It’s now easier to control your pension pot, but should you buy an annuity or go a more flexible alternative?

BIRMINGHAM, ENGLAND - SEPTEMBER 29:Chancellor of the Exchequer George Osborne addresses the Conservative party conference on September 29, 2014 in Birmingham, England. The second day of confe
(Image credit: 2014 Getty Images)

Chancellor George Osborne announced major changes to the pensions system in March, including a big shake-up for annuities. He then announced further changes at the Conservative Party conference in September. The new rules are good news – they give new retirees more freedom to manage their pension pots as they wish. They also make it easier for pensioners to pass on their wealth to their families when they die. So if you’re planning to retire in the near future, there’s a big question you need to think about: should you still buy an annuity? Or should you go for one of the more flexible alternatives?

Firstly, I should say that these new rules mainly apply to people with ‘defined contribution’ pensions – these are pensions where you gradually save into a pension pot over your working life, rather than ‘defined benefit’ schemes where your employer agrees to pay you a specific income on retirement. That said, you can convert your defined benefit pension to a defined contribution one.

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