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DC Pensions Flexibility

From March 2014 the following changes were introduced:

  • the maximum amount that can be taken out each year from a capped drawdown arrangement in increased from 120% to 150% of an equivalent annuity
  • the minimum guaranteed income threshold for access to flexible drawdown reduced from £20,000 to £12,000 
  • the amount which can be taken as a lump sum under the general rules on “trivial commutation” increased from £18,000 to £30,000
  • the size of a single small pension pot that can be taken as a lump sum at age 60, increased from £2,000 to £10,000
  • the total number of small personal pension pots that can be taken as lump sums increased from two to three.

Changes introduced in April 2015

In April 2015, DC pension savers were given greater flexibility in relation to how they access their individual savings pot. 

In addition to taking 25% of their individual savings pot as a tax-free cash lump sum they are now able to do any of the following with their remaining funds:

  • withdraw all their funds as cash, but pay income tax at their marginal rate
  • purchase a drawdown product (without any cap on the amount individuals can withdraw each year).
  • purchase an annuity.