New system to encourage further pension saving
Currently someone in income drawdown cannot receive tax relief on future contributions. To encourage further pension saving under the new system:
If they’re currently in flexible drawdown, they will have a new annual allowance of £10,000
If they drawdown more than 25% tax-free lump sum from a defined contribution pension, they will still be able to make further tax-relieved pension contributions to a defined contribution pension of up to £10,000 per year
The lower annual allowance will only apply if they’re taking a pot worth more than £10,000. If
they take a pot under £10,000, the standard annual allowance will apply
If they’re in capped drawdown on 5 April 2015,
they will benefit from the standard annual allowance until you take advantage of the new flexibilities and withdraw more than the maximum capped drawdown amount – when the £10,000 annual allowance would then apply