The Annual Allowance
The Annual Allowance (AA) is the amount by which the value of your pension benefits may increase in any one year without you having to pay a tax charge. This is in addition to any income tax you pay on your pension once it is in payment.
If the value of your pension savings in any one year (including pension savings outside of the LGPS) are in excess of the annual allowance, the excess will be taxed as income.
The Government reduced the AA from £255,000 to £50,000 from 6 April 2011 and then reduced it again to £40,000 from 6 April 2014. Further changes to the annual allowance were made for higher earners from 6 April 2016, which resulted in special transitional rules for the 2015/16 tax year.
|Period Input Period||Annual Allowance|
|1 April 2011 to 31 March 2012||£50,000|
|1 April 2012 to 31 March 2013||£50,000|
|1 April 2013 to 31 March 2014||£50,000|
|1 April 2014 to 31 March 2015||£50,000|
|1 April 2015 to 5 April 2016||£80,000 (transitional rules apply)|
|6 April 2016 to 5 April 2017||£40,000 (unless tapering applies)|
|6 April 2017 to 5 April 2018 onwards||£40,000 (unless tapering applies)|