Currently an individual can pay a pension contribution of up to £40,000 gross per annum into a personal pension plan provided he or she has sufficient relevant earnings against which to set the contributions.
From 6th April 2015 this will reduce to £10,000 for money purchase pension contributions where the member has dipped into the pot and taken a flexible income payment. However individuals who will be over the age of 55 at 5th April 2015 and have previously placed funds into capped drawdown, will be exempt from this new rule and may continue to contribute up to £40,000 (provided withdrawals remain within the capped drawdown limit).
For those who are aged at least 55 now but have not drawn anything from their pension plan they will also continue to be able to pay up to £40,000 per annum, (provided withdrawals remain within the capped drawdown limit). But if they first draw income from the fund after 5th April 2015 and later wish to make contributions, the limit will be £10,000 per annum.
Individuals who are now over 55 and have so far not drawn anything from their pension plans should therefore consider placing some funds into capped drawdown before 6th April 2015 if they wish to retain the option of being able to contribute more than £10,000 per annum in future. This will suit individuals whose income fluctuates: in lean years they drawdown some pension, in better years they contribute to the pension fund.
This is based on legislation as it currently stands and could change in the forthcoming budget or thereafter.
The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice. No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.