Updated 22/02/2015: Changes to AA / LTA
The Annual Allowance - i.e. the amount of retirement savings in a year that can be made without being subject to a tax charge - reduced from £50,000 to £40,000 with effect from 6 April 2014 and will remain at this level for most members. From 6 April 2015, the Annual Allowance will be reduced to £10,000 if you have withdrawn more than the 25% pension commencement lump sum from a defined contribution pot. If you are currently drawing down pension benefits using flexible drawdown, or you exceed the income limit for capped drawdown, you will also receive an Annual Allowance of £10,000 from 6 April 2015 in relation to your defined contribution savings. The Annual Allowance for the remainder of your pension savings (e.g. benefits accruing in this defined benefit section) are tested against a reduced 'normal' Annual Allowance of £30,000 plus any available carry forward.
The Lifetime Allowance - i.e. the total value of retirement savings that can be ‘crystallised’ without being subject to a tax charge - will reduce from £1.5 million to £1.25 million from the same date. The Government allows individuals to protect the benefits that fall between these figures by applying for protection. There are two types of protection - Fixed and Individual. Further details about valuing pension benefits for LTA purposes are available here.
(The annual benefits statements for ‘active’ members of the DB section will show personalised information related to AA and LTA utilisation.)