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At present, most people with defined contribution (DC) pension savings use them to buy an annuity. This is because pension tax legislation allows lump sum or flexible withdrawals only in limited circumstances. In Budget 2014, the Government announced that from 6 April 2015, people aged 55 and over would be able to access their DC pension savings when and how they choose, subject to their marginal rate of income tax.

The Taxation of Pensions Bill would make changes to pension tax legislation to implement this. It would also restrict and reduce certain tax charges applying to death benefits.

The Bill was published on 14 October 2014 and had its Second Reading in the House of Commons on 29 October. This was followed by four sittings of a Public Bill Committee between 11 and 20 November. During Committee stage, the Government made twelve amendments to the Bill and added a new clause to introduce a new schedule – regarding the tax treatment of unused funds on the death of a pension scheme member. Each was accepted without division. Two Opposition amendments were negatived on division. The Bill had its Report Stage and Third Reading on Wednesday 3 December 2014. The Government amended the Bill to simplify the reporting requirements on individuals who have flexibly accessed their savings. One Opposition amendment was defeated on division.

The Bill had its First Reading in the House of Lords, when it was endorsed as a Money Bill. It had its Second Reading and remaining stages in the Lords on 16 December 2014. The Taxation of Pensions Act 2014 received Royal Assent on 17 December 2014.

This note is a guide to debates in Parliament. The provisions in the Bill are discussed in more detail in Library Note SN 6891 Flexibility for DC pension savers from April 2015 (December 2014). The changes to pensions legislation necessary to implement the Budget announcement (for example, provision for a guidance guarantee and relating to transfers from defined benefit schemes) are in a separate Bill – the Pension Schemes Bill 2014/15. For more detail, see Library papers – RP 14/44 Pension Schemes Bill and for the debates in Parliament SN 7030 and SN 7105.

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