Retirement Planning - Pension Rules


A number of changes have been made to pensions which affect the way you can take your income and how death benefits are fixed and paid out.  Please read our fact sheet below to bring yourself up to date and understand how the changes will affect you and your family.


Flexible Access

If you are over age 55 (rising to 57 from 2028) and hold a defined contribution pension scheme, you will be able to access the whole of your pension fund as a lump sum if you wish.  The first 25% will be tax free and the rest will be subject to income tax at your marginal rate.  You need to be aware that it is possible your pension income could push you into a higher tax bracket.

You can choose either to take your pension in one go, or in stages.  It is also possible to take your tax free cash straight away and defer the income to a later date.

Existing capped drawdown schemes may not allow flexible access, but you will have the option to transfer to a new flexible arrangement.

Once you fully crystallise your pension fund, the maximum you can pay into the pension is £4,000 per annum. 


Transferring a Final Salary Scheme

If you hold a final salary scheme but want to take advantage of unlimited withdrawals, you now have the option to transfer to a defined contribution pension, such as a self invested personal pension (SIPP).  If this is something you are looking to do, you must get financial advice on the benefits you will be losing from transferring away from a final salary scheme.  Please also be aware that this will not be available to those in most public sector schemes.



Annuities will remain an option to anyone wanting to retire with a secure income, however, you will no longer be forced to do so at any point.

The maximum ten year guarantee period has now been removed.  Instead, the annuity provider can pay out annuity instalments for any defined period after the member’s death.


Trivial Commutation & Small Lump Sums

You can now take small lump sums and trivial commutation from age 55.  It may be possible to take payments earlier if you meet the ill-health criteria.

If the total amount of your benefits across all your pension schemes amounts to £30,000 or less, you can take this as a trivial commutation lump sum. 

You can cash in up to three small pension funds of £10,000 of less.


Death Benefits

Beneficiaries previously had to be a dependant (normally a spouse, partner or a child under 23).  You can now nominate anyone you like, whether they are related or not.

Benefits paid to beneficiaries on death before age 75 will be tax free.

If you die after age 75, the tax rate on lump sums is will be taxed at the beneficiary’s marginal tax rate from tax year 2016/17.


Lifetime Allowance

The lifetime allowance is a limit on the total value of your pension schemes.  The current lifetime allowance for most people is £1.030 million.

If your pensions are over the lifetime allowance limit, there will be an excess tax charge.  If you are at (or close to) the limit, then you need to take legal advice.



These new rules can be dangerous in the wrong hands.  You should always take advice before taking benefits from your pension scheme.  If you would like to discuss your retirement planning, please contact us on 01223 853599 or at




The above information is based on our understanding of current legislation and does not constitute advice.