Whilst you are contributing to your pension you are benefiting from tax relief on the pension savings you build up each year. The Government sets a limit on how much tax relief we can have and this is known as the Annual Allowance (AA). There is no limit on the amount you can save in a pension scheme just a limit on the amount that can get tax relief each year.
From 6 April 2011 the AA reduced from £255,000 to £50,000 and the method of calculating the increase in value of pension benefits changed too.
You will need to obtain the increase in value of your pension savings for the tax year from each arrangement you are saving with. If you exceed the AA you will be responsible for working out whether you are liable for an annual allowance charge and for reporting this on your Self Assessment tax return.
Please read on for further information. Please also refer to the HM Revenue & Customs (HMRC) website.
Members most likely to be affected:
- have a lot of scheme membership and have had a significant pay increase
- have been awarded a lot of additional membership
- pay high levels of AVC’s
 There is no blanket exemption from the annual allowance in the year benefits are taken.
From 6 April 2011 the exemption from the annual allowance for those with enhanced protection no longer applies.
The special annual allowance rules introduced in Finance Act 2009 have been repealed.
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