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News and Media

05 March 2015

Pensions Perspective: Can I make a contribution if I am in flexible drawdown?

I am currently in flexible drawdown and understand that the changes from April 2015 will allow me to make contributions of up to £10,000. In view of these changes can I make a contribution now to benefit from tax relief in this year?

You are correct in that from April 2015, members in flexible drawdown will automatically become subject to the new money purchase annual allowance (MPAA) and be able to make contributions of up to £10,000. However, you do raise an interesting point regarding members currently in flexible drawdown.

Members entering into flexible drawdown have to complete a declaration. If the relevant declaration for flexible drawdown was made in the 2014/15 tax year, then it is unsafe to make any contributions in the same tax year, as one of the flexible drawdown conditions is that 'no relevant contributions are paid under any money purchase arrangement (other than a cash balance arrangement) relating to the member under a registered pension scheme in the tax year in which the declaration is made'.

However if the relevant declaration for flexible drawdown was made prior to the 2014/15 tax year, it is possible to make a contribution now that complies with the proposed new money purchase annual allowance (MPAA), provided the pension input period (PIP) ends on or after 6 April 2015. Proving the PIP falls on or after this date, the tax year in which that contribution falls for the purposes of the MPAA test will be the 2015/16 tax year, and will therefore be governed by the new proposed pensions bill.

You will need to check with your provider/scheme when the declaration was made and when your pension input period ends.

City Trustees operates a free technical helpline to support advisers with pension challenges.

 

Pension Perspective is a weekly feature from City Trustees, covering questions that our experienced sales and technical teams have received from advisers. The Q&A covers a range of subjects including property, pension contributions, protection, auto-enrolment and more.

City Trustees operates a free technical helpline for advisers for support with pension challenges. Tel: 0116 240 8731 or email: technicalhelp@citytrustees.co.uk.

 

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