Pension flexibility: new options from 6 April 2015
Published 12 February 2015
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1. Access your savings
The rules on how you can access your defined contributions pension savings (also known as ‘money purchase’ schemes) are changing.
From 6 April 2015, from age 55, you can access as much of your defined contributions pension savings as you wish. There will be three main options but you can also choose any combination of these.
Schemes do not have to offer all these options and some may choose not to. Talk to your pension provider to see what options are available to you.
You can also transfer your pension savings to a pension provider that offers the option that you want to use.
Lifetime annuity
As you can now, you will be able to use some or all of your funds to buy an annuity which will be payable at least for the rest of your life. When you buy an annuity you can take a tax free lump sum of up to 25% of your pension pot at the same time.
Flexi-access drawdown
As you can now, you will be able to put funds into drawdown. From 6 April 2015 there will be no limits on how much or how little you can take from your drawdown fund each year. When you put funds into drawdown you can take a tax free lump sum of up to 25% of your pension pot at the same time.
Lump sum payment
From 6 April 2015 you can take money direct from your pension pot without having to buy an annuity or put the money into drawdown, and 25% of this sum will be tax free. This is called an ‘uncrystallised funds pension lump sum’ (UFPLS).
2. Tax on payments
All payments from an annuity or drawdown, and 75% of the amount of any UFPLS, are taxable as income.
The amount of tax you pay will depend on the amount of payments that you receive in the tax year plus any other taxable income you have.
3. Further information
Pension Wise is a free and impartial government service that helps you understand your new pension options.