Examples of Annual Allowance calculations

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Please note, the examples above make no allowance for any carry forward. The pension savings in the year assume that both Susan and Robert have no final salary benefits in the LGPS and that they are not paying any additional contributions.
 

Susan

   
     
Gross Annual Salary in 2016/2017 £120,000  
Less Employee Pension Contributions £13,680 11.4%
Threshold Income 2016/17 £106,320
Below £110,000 so the AA will not be
tapered and remains at £40,000
Pensions saving in the year £39,184 Less than £40,000 so no tax charge
     
     

Robert

   
     
Gross Annual Salary in 2016/2017 £130,000  
Less Employee Pension Contributions £14,820 11.4%
Plus taxable income from property £30,000  
Threshold Income 2016/17 £145,180  
Plus pensions saving in the year £42,449  
Adjusted Income 2016/17 £187,629 Greater than £150,000 so the AA will be tapered
Tapered AA £21,185*  
In excess of AA £21,264 Pension saving of £42,449 less tapered AA
AA tax charge at marginal rate (assumed to be 40%) £8,505 £21,264 x 40%
 
*Taper = £187,629 - £150,000 = £37,629/2 = £18,815. Standard AA £40,000 less £18,815 = £21,185