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HMRC internal manual

Pensions Tax Manual

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Member benefits: pensions: drawdown pension rules applying from 6 April 2015: drawdown pensions - changes from 6 April 2015

Glossary PTM000001
   

A drawdown pension 
Short-term annuity 
Income withdrawal 
First flexible access and the annual allowance

A drawdown pension

Paragraph 4 Schedule 28 Finance Act 2004

From 6 April 2015, drawdown pension continues to comprise both a short-term annuity and income withdrawal but the nature of both these types of drawdown pension has changed.

Short-term annuity

The rules about allowable reductions in short-term annuities have changed. The revised rules for a short-term annuity apply to those purchased on or after 6 April 2015 (see PTM062720).

For short-term annuities that were purchased before 6 April 2015, the rules are unchanged. See PTM062620.

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Income withdrawal

From 6 April 2015, flexi-access drawdown is the only unsecured pension option open to a member of a money-purchase arrangement where, before 6 April 2015, none of the funds in the arrangement had been designated as available for the provision of drawdown pension. From that date, the tax rules allow members to designate the sums and assets in their money purchase arrangement into a flexi-access drawdown fund from which they can draw down any amount over whatever period they choose providing they have reached normal minimum pension age (normally age 55, but an earlier age if member meets the ill-health condition - see PTM062100 - or has a protected pension age - see PTM062200). See PTM062730 onwards for more detail on the rules for flexi-access drawdown.

Where, before 6 April 2015, an individual had designated funds into one or more drawdown pension funds from which they were taking flexible drawdown, then on 6 April 2015 these funds automatically became flexi-access drawdown funds. See PTM062740 for more detail.

Where, before 6 April 2015, an individual had designated funds into one or more drawdown pension funds from which they were taking capped drawdown pension, then from 6 April 2015 the individual may either:

  • arrange at any time from 6 April 2015 onwards for their fund to be converted into a flexi-access drawdown fund, or
  • continue to take a capped drawdown pension from the arrangement.

See PTM062750 for more detail.

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First flexible access and the annual allowance

First flexible access on or after 6 April 2015 immediately triggers the money purchase annual allowance rules. These rules limit the amount of tax relief the member can get on future savings to any money purchase arrangement. See PTM056520 for more guidance on what circumstances constitute first flexible access.