Annual Allowance

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The Annual Allowance (AA) refers to the amount by which a member's pension can grow within a Pension Input Period (PIP). The PIP was aligned with the tax year from 8 July 2015 onwards. If the pension growth in a PIP is greater than the Annual Allowance available to the member, then they will be subject to a tax charge on the excess.

A Pension Savings Statement (PSS) is only issued to members who we identify as having exceeded the standard Annual Allowance, which is £60,000 as of the 2023/24 tax year. Please note that this assessment is carried out using the information provided to us, and we can't be held accountable for errors or omissions in the service and salary information provided by your employer. There will be members who may not know what their Annual Allowance is until after the end of the tax year in question and therefore will not know if or where they fall within the tapered range (see below).

On 6 April 2016 a ‘taper’ to the Annual Allowance was introduced. For information on how the taper operated until 6 April 2020, please see our briefing notes.

With effect from April 2023 (tax year 2023 / 2024) the tapered Annual Allowance consists of the threshold income limit of £200,000 and the adjusted income limit of £260,000. The taper works by reducing an individual’s Annual Allowance by £1 for every £2 of adjusted income over £260,000 although those with a threshold income of £200,000 or less will be exempt from the taper no matter their level of adjusted income. The Annual Allowance can only be tapered down to a minimum of £10,000.

As a result of the introduction of tapering the Department for Education now allows members to make Scheme Pays elections on a ‘voluntary’ basis. This applies from the 2016/17 PIP onwards. It must be noted that we cannot accept a voluntary Scheme Pays election for any year prior to the 2016/17 tax year.

Last Updated: 27/02/2024 10:06


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