The minimum age for taking benefits will rise from 50 to 55 by 2010. Schemes will be free to decide how to move to this new minimum age. Early retirement because of ill health will continue to be allowed.
Under the new regime, up to 25% of the pension fund, below the lifetime allowance, can be paid as a tax-free lump sum. For many people, particularly those in schemes where the lump sum is currently capped, this represents a significant increase.
If death occurs before pension benefits are taken, the fund can be paid to dependants as a lump sum subject to the lifetime allowance charge, if relevant, or as pension income subject to income tax.