Pension freedoms

Pension flexibilities introduced on 6 April 2015

On 6 April 2015, the rules governing the use of defined contribution (DC) pension pots were relaxed so that individuals who have reached normal minimum pension age now have the following options at retirement, whatever the amount of their DC pension pot:

1. •

   they can buy an annuity—for more information, see Practice Notes: Annuities for pension lawyers and Guaranteed annuity rates (GARs)

2. •

   if the scheme permits it, they can:

   1. ◦

      take funds from their pension pot as a single lump sum or a series of lump sums, with the first 25% tax-free and the remainder taxed at the member's marginal rate of income tax. Such lump sums are known as uncrystallised funds pension lump sums—for more information, see Practice Note: Uncrystallised funds pension lump sums (UFPLSs)

   2. ◦

      drawdown on their pensions pot, with the option of taking a 25% tax-free lump sum and any amount drawn down thereafter being treated as income and taxed at the member's marginal rate of income tax. Drawdown funds created on or after 6 April 2015 are known as flexi-access drawdown funds—for more information, see Practice