More than a million over 55s face tougher pension restrictions

Those dipping into their pensions using the pension freedoms introduced in 2015 need to be aware of the taxation implications of doing so if they also want to continue to save into a pension. An increasing number of individuals have been reported to be breaching the allowance. In the 2015-16 tax year, 8,890 individuals breached the allowance and paid £19,933 in average excess. By the following tax year, this figure doubled to 18,930 reported cases paying an average charge of £29,635¹.

Although tax relief is normally available on pension contributions up to £40,000 a year, once a pension saver makes a flexible withdrawal, the Money Purchase Annual Allowance is restricted to £4,000. Keeping up to date with pension rules and limits can seem complex and time-consuming, so do ask us for advice.

¹ HMRC, FOIA request