Retirement savers with flexi-access drawdown accounts can transfer their funds to alternative providers, despite common misconceptions about frozen assets.
Online investment platform AJ Bell has issued guidance to clarify the rules.
>>> BMW Withdraws from Paris Motor Show, Citing Shift in Priorities
Transfer Rules and Tax-Free Cash
HM Revenue and Customs regulations permit transfers as long as all assets within a specific arrangement are moved together to avoid tax penalties.
Pension legislation does not automatically freeze funds once drawdown begins, provided the receiving scheme can accommodate the underlying investments and offers matching flexi-access terms.
Savers who fully access their tax-free allowance upon entering drawdown cannot claim additional tax-free cash from subsequent fund growth within those specific plans, as those assets are already fully crystallised.
However, untouched or uncrystallised pension pots remain eligible for tax-free withdrawals.
>>> Priyanka Chopra Marks Birthday as Husband Recalls Engagement
Typically, this is up to 25 percent of the accessed amount or the remaining standard lump sum allowance, currently capped at £268,275 for most individuals.
For individuals who accessed pension benefits prior to April 6, 2024, a transitional calculation determines the available tax-free allowance.
This is done by deducting 25 percent of the previously used lifetime allowance percentage from the standard limit.
>>> US Supreme Court to Review Alaska Aircraft Seizure Case
Pensions expert Charlene Young explained the UK rules regarding drawdown transfers, tax-free cash limits, and transitional allowance calculations.
