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Benefit options and allowances
The main purpose of a pension is to provide an individual with an income when they reach a certain age.
This section provides information on the way benefits can be taken and the limits, protections and allowances that are available to your clients.
Lump sum allowance and lump sum and death benefit allowance
Lump sum allowance and lump sum and death benefit allowance
The lifetime allowance charge was removed from 6 April 2023. The lifetime allowance has been replaced by a lump sum allowance and a lump sum death benefit allowance from 6 April 2024.
Lump sum and lump sum death benefit allowance from 6 April 2024
Protecting benefits and tax-free cash
It is currently possible to protect benefits from income tax if they exceed the lump sum allowance and lump sum and death benefit allowance. This protection has the effect of locking the lump sum allowance and lump sum and death benefit allowance a certain rate, meaning the reduction won't apply. However, there are conditions which, if broken, will result in protection being lost.
Pre 6 April 2006 benefits and tax-free cash
Pensions legislation changed on 6 April 2006. However, it was possible to protect existing benefits. It was possible for members of pension schemes set up before 6 April 2006 to protect the benefits that they already had. There were 2 types of protection - primary protection and enhanced protection.
Primary and enhanced protection
Scheme specific tax-free cash
Individuals who had a right to more than 25% tax-free cash on 6 April 2006 and who didn't opt for protection (see above) may still have their tax-free cash entitlement protected. This is called scheme specific protection.
Protection of scheme specific tax-free lump sum
Transitional tax-free amount certificates
Transitional tax-free amount certificates
Here we explain what a transitional tax-free amount certificate is and does. How to decide whether to apply for one and what information would allow you to successfully apply for one.
Basics
Basics
This analysis focuses on when benefits can be taken, summarises the main options available and also looks at the restrictions that apply.
Protected pension ages, including the increase to 57 in 2028
Case studies
Income drawdown
Income drawdown
One of the most popular options is income drawdown. There are two types: capped and flexi-access drawdown.
Flexi-access drawdown - Since 6 April 2015 any new drawdown plans must be a flexi-access drawdown plan.
What is flexi-access drawdown?
Capped drawdown - New capped drawdown plans were only available until 6 April 2015. Existing plans can continue as long as the GAD limit is not exceeded.
Capped income drawdown and review dates
Beneficiary drawdown - Beneficiary drawdown is a death benefit option.
Lifetime allowance
Lifetime allowance (before 6 April 2024)
The lifetime allowance charge was removed from 6 April 2023. The lifetime allowance has been replaced by a lump sum allowance and a lump sum death benefit allowance from 6 April 2024.
Lifetime allowance and benefit crystallisation events before April 2024
Lumps sums
Lump sums
Sometimes it's possible to exchange all pension benefits for a one-off lump sum.
Uncrystallised funds pension lump sums
Emergency rate tax
An explanation of when emergency rate tax applies and how to get it back.
Reaching age 75
Reaching age 75
We look at reaching age 75 in our top five FAQs
Recycling
Recycling
Once benefits have been taken, it's possible to re-use this money and pay it back into a pension. However, you won't be surprised to hear that there are rules and restrictions in place.
Our frequently asked questions
Our frequently asked questions
Here we look at some of the questions we are asked most often.
Ask a question
Ask any specific questions you might have about the world of pensions or protection to our technical experts.