Tempted to dip into your Pension?

If you need some money and you’re aged 55 or more, it might be tempting to dip into your personal pension fund. Changes to pension rules in April 2015 has made it easier to access your fund.

The problem is that doing so reduces the amount you (or your company) can pay into other pension savings without it triggering a tax charge.

This arises because of the Money Purchase Annual Allowance (MPAA) which has a limit of £4,000.

These situations will trigger the MPAA:

  • Taking flexi-access drawdown income.
  • Taking an uncrystallised pension lump sum (UFPLS) or a stand alone lump sum.
  • Flexible drawdown which was set up before 6 April 2015.
  • Certain small scheme pensions and overseas payments.

It doesn’t include:

  • Taking tax free cash but deferring the income
  • If you receive a scheme pension from a defined benefit scheme
  • ‘Capped income drawdown’ that was set up pre 6 April 2015, if you’re staying within the limits.
  • A small pot pension worth less than £10,000.

Have you paid too much into your pension this year? HMRC suspects that many taxpayers are unknowingly falling foul of the new limit. It’s launched an updated tool so you can easily check whether you need to pay tax on your pension contributions. You can find it here

Would you like us to help you?

Call 0117 290 0370 if you’d like to find out more about how we work with business owners. Ask to book a free 20 minutes telephone consultation with Hilary Carden.

Alternatively drop us an email to:  enquiries@cardens.co.uk

More Reading:

Dividends and Pensions

What is Carry Forward?

Important Risk Warnings:

This article and the information on this website is not personal advice. It’s only intended to give you a brief summary or highlight a particular issue for you to investigate further. It is based on our current understanding of legislation and HMRC guidance which can change. Correct as at March 2019. If you’re in any doubt whether a particular course of action is suitable for your circumstances, you should seek professional advice. Tax rules can change and any benefits depend on individual circumstances. And, if you are unsure any reliefs are applicable to you, you should consult your accountant or HMRC.

The value of investments and any income from them can fall as well as rise, so you could get back less that you put in. Past performance is not a guide to the future. It cannot provide a guarantee of the future returns of a fund.

 

 

  • Hillary Carden

    Hilary is a force to be reckoned with in the pensions field. She founded Cardens in 1993 and Cardens Pension Trustees Ltd in 1995 and became one of the first women to become a Registered Life Planner® and with 30+ years experience of advising on and managing pension schemes, she really is an expert in retirement and financial planning.

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