Change 3: New restrictions on how much you can contribute to private pensions

Over the next week or so, we will detail the pension changes due to come in from April 2015.

Change 3: New restrictions on how much you can contribute to private pensions

What is changing:

Pension contributions are (and will still be after April 2015) subject to a £40,000 annual allowance and specific contribution rules. However, if after April 2015 you make withdrawals from a defined contribution pension in addition to tax-free cash, contributions to defined contribution plans could also be restricted to £10,000.

When you flexibly access benefits you must, within 91 days, inform any of your pension providers to which contributions are subsequently paid, or face a £300 fine.

Who will be affected:

Anybody who has a defined contribution pension and takes income from it after April 2015 could be affected. There are three exceptions:

1. Your pension is worth £10,000 or less and you take it as a ‘small pot’. You can do this up to three times from a personal pension and unlimited times from occupational ones. Other conditions apply; or

2. You go into capped drawdown before April 2015 and your withdrawals after that remain within the current drawdown limit, even if you move more funds into the same plan; or

3. You take your pension as a lifetime annuity (other than a flexible annuity) or scheme pension (except when fewer than 12 people are entitled to one under that scheme).

This £10,000 limit does not apply to any benefits you are building up in a final salary pension. Investors already in flexible drawdown before April 2015 will be able to make contributions of up to £10,000 a year (they are not currently allowed to make any contributions).

We will detail another change tomorrow!
If you have any queries in relation to these changes or need any further guidance, please do not hesitate to contact us on 01772 825755.

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