Pensions are changing

Pension changes

The world of pensions is changing significantly over the next six months, now you have the opportunity to make decisions which could change your life in retirement.

Annual Allowance

  • The annual allowance is the maximum that an individual can put into their pension pot without a tax charge applying. The annual allowance will remain at £40,000 for the 2015/16 tax year.
  • From the 2016/17 tax year, if an individual’s income exceeds £150,000, they will have their Annual Allowance reduced by £1 for every £2 of income they receive up to an income of £210,000. This will reduce their Annual Allowance to £10,000.


Carry forward

  • The reduction of the Annual Allowance has meant that this is the last year that a significant contribution can be made to a pension scheme using the carry forward rules. It is possible to bring forward all unused allowances for the previous three tax years and use them in the current year. However, from next tax year, the carry forward allowance will be limited to £40,000.


Lifetime allowance 

  • The Lifetime Allowance (LTA) is the maximum pension that an individual can accumulate over their lifetime – funds in excess of the LTA which are accessed in retirement will be subject to a tax charge of 55%.
  • The LTA has been cut back to £1.25m (2014) and, in 2016, it is proposed that it is to be reduced again to £1m although it will be index-linked from 2018.


Pension Freedom 

  • From April 2015, individuals that reach retirement age no longer have to buy an annuity with their pension funds. The individual will have unlimited access to their fund. This applies not only to money purchase schemes but also final salary pensions.


If you are looking to retire in the next 5 years or are conscious of what your pension pot looks like and would like to know how these changes impact you, then please contact our Tax Team or call 0161 249 5040.