Updated 22/02/2015: Changes to AA / LTA

The Annual Allowance - i.e. the amount of retirement savings in a year that can be made without being subject to a tax charge - reduced from £50,000 to £40,000 with effect from 6 April 2014 and will remain at this level for many members.  From 6 April 2015, the Annual Allowance will be reduced to £10,000 if you have withdrawn more than the 25% pension commencement lump sum from a defined contribution pension pot.  If you are currently drawing down pension benefits using flexible drawdown, or you exceed the income limit for capped drawdown, you will also receive an Annual Allowance of £10,000 from 6 April 2015.

The Lifetime Allowance - i.e. the total value of retirement savings that can be ‘crystallised’ without being subject to a tax charge - reduced from £1.5 million to £1.25 million from 6 April 2014.  The Government will allow individuals to protect the benefits that fall between these figures by applying for protection.  There are two types of protection - Fixed and Individual.  Further details about valuing pension benefits for LTA purposes are available here.

 

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