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Pension Rule Changes

Pensions have recently been through a number of important changes. To help you understand the new rules, we’ve summarised the major pension rule changes and built useful tools.

2017 pension changes

  • What's changing

    money purchase annual allowance for pension contributions has fallen to £4,000 (previously £10,000)


    6 April 2017

    Who's affected

    anyone who has flexibly accessed their pension since 5 April 2015 and anyone in flexible drawdown before 6 April 2015

    Annual allowance factsheet

2016 pension changes

  • What has changed

    annual allowance for pension contributions has fallen to as little as £10,000


    6 April 2016

    Who's affected

    potentially anyone with income over £150,000, although those with lower incomes could be caught too

    See how much you can invest

  • What has changed

    the lifetime allowance has fallen from £1.25 million to £1 million


    6 April 2016

    Who's affected

    anyone with pensions that could be worth £1 million+ when they take benefits or reach age 75

    What to consider now

    apply for protection to secure a higher allowance

    Lifetime allowance factsheet

  • 2015 pension freedoms

    On 6 April 2015, "the most radical changes to pensions for almost a century" took effect. Here is a brief overview, for a full explanation download our pension changes factsheet.

    You can take advantage of the new pension freedoms by using the Vantage SIPP.

    • Most pension investors aged 55 or over now have total freedom over how they take their pension.

      Restrictions on how much income can be drawn from pensions have been scrapped - you have the freedom to choose how much income you take from age 55 (57 from 2028).

      You can choose to:

      • Take the whole fund as cash in one go - 25% tax free and the rest taxed as income;
      • Take smaller lump sums, as and when you like with 25% of each withdrawal tax free and the rest taxed as income;
      • Take up to 25% tax free and a regular taxable income from the rest (via an annuity or drawdown).

      It's also possible to take the tax-free cash straightaway and the taxable income via drawdown at a later date.

      Please remember, your pension may need to last you throughout your retirement.

      Guide to your options at retirement

    • The 55% pension death tax was abolished on 6 April 2015.

      The new pension rules on death mean any money left in your pension when you die can usually be passed to your beneficiaries tax free. Withdrawals they make will normally be tax free if you died before 75, or taxed as their income (0%, 20%, 40% or 45%) if you died after turning 75. Find out more.

      Inheritance tax does not usually apply to a pension.

      'What happens to your pension when you die' factsheet

    • Income paid to a spouse or partner used to be subject to tax. They are now free of UK income tax if you die before age 75 and the annuity you have is a lifetime annuity. A joint-life or dependant’s annuity can be paid to anyone after you die, subject to any restrictions of your annuity provider.

      Guide to taking a secure retirement income

    • Everyone can now access free guidance to help them make sense of their options at retirement. This service is called Pension Wise and is provided by Citizens Advice and the Pensions Advisory Service. There is no charge and your pension provider is required to tell you about this impartial guidance. More about Pension Wise.

    • Pension contributions are usually subject to a £40,000 annual allowance for most people. A new money purchase annual allowance was introduced for people who have flexibly accessed a pension. It was originally £10,000, and fell to £4,000 on 6 April 2017.

      To find out more about these allowances, request an Annual Allowance Factsheet.

    Request full pension changes factsheet