NEW PENSION CONTRIBUTION RULES
What has Changed?
Pension contributions are subject to a £40,000 annual allowance and specific contribution rules. Under the new pension contribution rules a £10,000 allowance has been introduced for people who have flexibly accessed a pension.
Avoid a £300 Fine
When you flexibly access benefits you must, within 91 days, inform any of your pension providers to whom you are still making contributions that your new allowance is £10,000 a year and no longer £40,000. Fail to do this and you could face an HMRC fine of £300, which increases by £60 a day if not paid. The pension provider with whom you flexibly access benefits should usually inform you if this applies, but they won’t necessarily know that you have other providers and they have no incentive to make sure you are aware of the rule – so it’s up to you!
Who is Affected?
Anybody who has flexibly accessed a pension since 6 April 2015 might be affected. Flexibly accessing a pension includes:
• Taking an uncrystallised funds pension lump sum (UFPLS) or a standalone lump sum
• Having flexible drawdown before 6 April 2015 (previously you were unable to make contributions, but now you can)
• Taking an income payment from drawdown set up or converted to flexible drawdown after 5 April 2015
• Exceeding income limits from capped drawdown set up before 6 April 2015
• Taking an income payment from a scheme pension with 12 or fewer members or from a flexible annuity
Flexibly accessing a pension does not include:
• Taking tax-free cash and no income
• Taking a pension as a small pot due to it being worth less than £10,000
• Taking income from capped drawdown set up before 6 April 2015 which remains within capped drawdown limits
• Taking a pension as an annuity or scheme pension other than as described above
This £10,000 limit applies to contributions you and your employer make to money purchase pensions (e.g. personal pensions). It does not apply to any final salary pension benefits you are building up.