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).