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Lifetime allowance and benefit options

The main purpose of a pension is to provide a member 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.

The basics

This analysis focuses on when benefits can be taken, summarises the main options available and also looks at the restrictions that apply.

Reaching age 75: our top five frequently asked questions

We look at reaching age 75 in the latest in our series of top five FAQs on pensions technical topics.

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. 

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.

CPD | Income drawdown – Here we look at the market trends since pension freedoms began in 2015, including changes in withdrawal patterns and the consideration of changes in the demographics of UK society. Craig also talks about the retirement outcomes review (ROR), how this has changed at retirement advice and much more including best practice in FAD file construction how to review income drawdown plans in a compliant and cost effective manner. Recorded on 27 February 2020.

Lump sums

Sometimes it's possible to exchange all pension benefits for a one-off lump sum.

Emergency rate tax

An explanation of when emergency rate tax applies and how to get it back.

Lifetime allowance

There is a maximum amount that can be taken from a pension scheme without being subject to a tax charge. This is called the lifetime allowance and fittingly the tax charge is called the lifetime allowance charge.

It is currently possible to protect benefits from a lifetime allowance charge as a result of the lifetime allowance being reduced. This protection has the effect of locking the lifetime allowance at a certain rate, meaning the reduction won't apply. However, there are conditions which, if broken, will result in protection being lost.

CPD | Opening the door to lifetime allowance and relevant life – In this webinar we look at the features and benefits of a relevant life plan, and how it could be an efficient form of life cover for those clients who may have a lifetime allowance issue

Recycling

Once benefits have been taken, it is 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.

Retirement benefits in public service pension schemes

This interactive policy paper looks at the wider rules of the Teachers’ and NHS pension schemes and how members can claim their benefits.

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This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.