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The Pension FreedomsWhat do the pension freedoms mean for me?

What's changed? How could this affect me?
Unrestricted access to pensions from age 55

Since April 2015, the new rules will allow pension savers over the age of 55 to take benefits from their pension in any way they choose, meaning that should they wish to do so, they could take the whole pot in one go as a lump sum, or smaller lump sums as and when they choose.


Caution should be taken however, as this approach could lead to a large proportion of your pension being lost to taxation. Throughout this brochure we will provide you with the variety of options that are at your disposal to help you maximise your income.

GAD Limits

Previously, those who were taking an income from their pension through income drawdown were subject to limits on the amount of money that could be taken out each year. This was calculated using the Government Actuary's Department tables.


Since April 2015, these restrictions have been lifted, meaning that if you choose to enter income drawdown (rather than take an annuity) you can draw as much as you wish, subject to income tax.

New restrictions on pension contributions

Previously, there was an annual allowance of £40,000 for pension savings, and if this amount was exceeded there may have been a tax charge. Whilst this limit still remains, since April 2015, if you make certain withdrawals from a money purchase arrangement, other than your pension commencement lump sum, the amount you can contribute to defined contribution plans without incurring this tax charge will be restricted to £10,000 per year.


However, if you were in capped drawdown before 6 April 2015 and your withdrawals after that remain within the limit, this restriction of £10,000 will not apply and you can continue to contribute up to the higher £40,000 annual allowance.

Death benefits

Previously a 55% 'death tax' charge was payable if you died aged over 75 or after you have taken benfits from your pension. Since April 2015 this charge has been abolished. The tax treatment of any pension you pass on, which you do not use to purchase an annuity, will depend on your age when you die.


If you die before the age of 75 your beneficiaries can take the whole pension fund as a tax free lump sum or draw a tax free income from it, either by choosing to buy an annuity or by using income drawdown.


If you die after the age of 75 your beneficiaries can either take the whole fund as cash, subject to 45% tax. Take a regular income through an annuity or income drawdown, subject to income tax at your beneficiary's marginal rate. Or take a series of lump sums through income drawdown, the lump sums will be treated as income, so subject to income tax at your beneficiary's marginal rate.

Transferring final salary schemes

Final Salary Scheme (Defined Benefit) holders may be able to transfer to Defined Contribution schemes in order to benefit from the new unlimited withdrawal rules which came into force in April 2015. Scheme holders will, however be required to have received financial advice before doing so, as significant benfits could potentially be lost. Transferring is also not permitted if the defined benfit scheme is already in payment.



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