Access your hard earned money in the most tax efficient way.
(details correct as at May26)
Pension freedom gives individuals further and greater flexibility to access their pension savings from age 55.
Pension simplification introduced two new controls, the Lifetime Allowance (LA) and Annual Allowance (AA). The LA was abolished in April 2024 and has been replaced by the Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100 and the Lump Sum Allowance (LSA) of £268,275 from 6 April 2024.
The individual AA is £60,000 for 2026-27. As well as funding up to the AA in the current tax year, there is the possibility to also carry forward unused AA from the previous three years. Exceeding the AA will trigger a tax charge.
Other changes included:
- Early retirement age available from age 55
- Full concurrency (i.e. being able to pay into any array of plans you wish), subject to the Annual Allowance and potential for carry forward
- Wide investment flexibility
- Up to 25% tax-free cash
- The ability to commute ‘small’ funds as a one-off lump sum as opposed to having to draw a regular income from age 55 (subject to part of the fund being taxed)
- Flexible options at retirement when deciding to take benefits such as Flexi-access Drawdown
- No need to ‘have to’ secure benefits at age 75 via an annuity
In addition, pension freedom gives individuals further and greater flexibility to access their pension savings from age 55*.
The changes include:
- To increase the flexibility of the drawdown rules by removing the maximum ‘cap’ on withdrawal and minimum income requirements for all new drawdown funds from 6 April 2015
- To enable those with ‘capped’ drawdown to convert to a new Flexi-access Drawdown fund once arranged with their scheme
- To enable pension schemes to make payments directly from pension savings with 25% taken tax-free, known as the Uncrystallised Fund Pension Lump Sum (UFPLS) option
- To remove restrictions on lifetime annuity payments
- To ensure that individuals do not exploit the new system to gain unintended tax advantages by introducing a reduced Annual Allowance of £10,000 for money purchase savings where the individual has flexibly accessed their savings
- To increase the maximum value and scope of trivial commutation lump sum death benefits.
*From April 2028, you will have to be 57 before you can access your pension under the pension freedom rules
With greater pension flexibility comes more options which may be confusing. We understand how the changes affect you and can advise you on the most efficient way to access your pension. Contact us for your free 30 minute initial consultation.