What is the pension annual allowance for a UK pension plan in 2016/17?

I am heading towards retirement and trying to squirrel away as much as I can. I wanted to know whether there have been any changes to the pension annual allowance in 2017/18 which would either increase my options or limit them?

Question asked by Tom Fairfield
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Answered by Neil Adams

Pension annual allowance 2017/18

Regardless of whether you’re still working or you’ve moved into retirement, total pension contributions are normally subject to an annual cap of £40,000 – assuming you have the income to justify such a contribution level.

However, if you’re earning more than £150,000, you’re subject to the tapered annual allowance, which sees the amount you can contribute to a pension fall by £1 for every £2 you earn above £150,000.

The lowest your annual allowance can fall to is £10,000, which applies to anyone earning £210,000 or more. Check your available pension annual allowance with the Drewberry Pension Annual Allowance Calculator.

Flexible drawdown allowance

However, once you access pension benefits flexibly, including under the new income drawdown rules or through a lump sum withdrawal (referred to as a uncrystallised funds pension lump sum or a UFPLS), or if you held flexible drawdown before 6 April 2015, your contributions are restricted to £4,000 per tax year. This cap is known as the money purchase annual allowance.

Those in capped drawdown, who choose not to convert to drawdown under new pension rules, will not be subject to the money purchase contribution restriction provided they don’t flexibly access pension benefits in another way or exceed their agreed capped drawdown figure.

Need financial advice?

If you need some financial advice to help plan for your retirement, please don’t hesitate to call us on 02084327333 or drop us a line on wealth@drewberry.co.uk.

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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