![]() Income drawdown isn't the only way to get an income for your retirement. What are the alternatives to pension drawdown? If you remain in capped drawdown, you can still contribute £60,000 a year to your pension.īoth the MPAA and the pensions annual allowance were increased in Jeremy Hunt's 2023 Spring Budget. ![]() However, this rule doesn't apply if you're already in a capped drawdown plan. This restriction is technically called the 'money purchase annual allowance' or MPAA, and covers both your savings and contributions from your employer. But if you open a drawdown plan, the rules change.Īs soon as you take more than your 25% tax-free lump sum, the annual amount you can contribute to a pension falls to £10,000. You can contribute a maximum of £60,000 a year to a pension - known as the pensions annual allowance. Can I still save into a pension if I open a pension drawdown plan? Since April 2015, capped drawdown has no longer been available for those taking benefits from their pension fund for the first time. You can either convert to flexi-access drawdown or keep capped drawdown. If you're in a capped drawdown arrangement you have set up under the old rules, you have two options. If you're in a flexible drawdown plan, this automatically converted to flexi-access drawdown from 6 April 2015. What happens if I'm already in pension drawdown? This makes it extremely important to complete your provider's 'expression of wish' form, declaring who should inherit your pension pot. The inheritors of your pension will pay tax at their marginal rate of income tax, whether they take the remaining fund as a lump sum or as a regular income from a drawdown plan.Īnother important change is that death benefits can now be left to anyone you choose, not simply dependents (such as your spouse). This could be taken as a regular income from your drawdown plan, or as a whole lump sum. It used to be a whopping 55%.Īll pension funds left by someone who dies under the age of 75 can be inherited tax-free. The amount of tax paid on your remaining pension when you die has been cut. Income taxes in Scotland work differently.įind out more: Tax on pensions - see how much you might pay on a lump sum What happens to my pension drawdown plan when I die? These figures apply to income tax in England, Wales and Northern Ireland. So if you took out £50,270, and had no other income from private pensions and the state pension, you'd have a tax bill of £7,540 after taking your £12,570 tax-free allowance into account.
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