A note to all current or prospective clients on the Pension changes and how they relate to our speciality for SSAS pension schemes as a tax saving measure.


Flexible Access

Pension savers can now withdraw up to 25% of their total pension pot tax free from the moment they turn 55.   This can be done immediately for a large lump sum payment or they can withdraw smaller sums over a number of years and receive 25% of each small withdrawal tax free.

Money taken in excess of this 25% tax free sum is treated as normal income, so a saver can withdraw up to £10,000 per year at current personal allowance rates from their pension without paying a penny of tax if they’ve taken the 25% lump sum or £13,333.33 each year as a smaller lump sums (after the 25% tax free leaving taxable income of £10,000)


Contributions to your pension

Pension contributions are capped at £40,000 as of now.  In the future, should you withdraw from your pension fund beyond the tax free lump sum, this cap will be automatically lowered to £10,000 of contributions in a year, which is one restriction preventing savers treating this as a separate bank account.

There are exemptions allowing ‘small pot’ withdrawals of £10,000, which are either limited to three for a personal pension or unlimited for an occupational pension.


Inheritance tax on passing on your pension

The new tax rules on inheritance tax are as follows:

If you die before 75 your beneficiaries can take the entire pension as a tax free lump sum, trade it for an annuity, or use the income drawdown explained above (Without the 25% tax free amount).

If you die after 75 three options are available:

  • Take the sum as cash at a 45% tax rate.
  • Take income drawdown as above (without the 25% tax free amount).


Other Notes

  • Annuities can now be transferred to a spouse or partner after you die.  If you die before the age of 75 this will be a tax free transfer.
  • Pension advice can now be sought for free by the Citizen’s Advice Bureau and the Pensions Advisory Service.
  • Final salary pensions can be transferred to a pension scheme that operates under these new rules.