Know your limits

The Government has set some limits on the amount of money that you can pay into pension scheme and benefit from tax relief on.

Annual Allowance (AA)

The Annual Allowance (AA) is a limit to the total amount of contributions that can be paid to defined contribution (DC) pension schemes and the total amount of benefits that you can build up in defined benefit (DB) pension schemes each year, for tax relief purposes.

For the DB Section, the AA is calculated by looking at how much your pension has increased from the previous year and then adding on any AVC contributions that you have paid. We confirm this to you each year on your annual benefit statement. The Scheme is required to measure the year from 6 April to the following 5 April.

The standard AA is currently set at £40,000, however, depending on your level of taxable pay, you may be subject to the Tapered Annual Allowance which could be as low as £4,000, click here to read more about this. 

If you have taken any Defined Contribution benefits flexibly, including taking more than 25% as a lump sum then you may be subject to a further reduced AA. If you believe that this affects you, please contact Group Pensions for more information.

The AA figures quoted are correct for the 2020/21 tax year. 

Lifetime Allowance (LTA)

The Lifetime Allowance (LTA) is the maximum amount you can take in pension benefits during your lifetime from all UK Revenue approved pension schemes before an additional tax charge is incurred. The LTA excludes the State Pension and Spouse’s Pensions.

If the LTA is exceeded, you will be subject to the LTA tax charge.

Retirement Date

Lifetime Allowance

6 April 2014 to 5 April 2016

£1.25 million

6 April 2016 to 5 April 2018

£1 million

6 April 2018 to 5 April 2019

£1.03 million

6 April 2019 to 5 April 2020

£1.055 million

6 April 2020 to 5 April 2021

£1.0731 million

From 6 April 2021

To be confirmed*

* Changes to the Standard Lifetime Allowance are announced by the Government in the Budget each year.

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