For Members
Teachers' Pensions
Annual Allowance

Annual Allowance

apple chalk and books

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 personal Annual Allowance available to the member, then they will be subject to a tax charge on the excess. 

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

On 11 March 2020 the chancellor of the Exchequer announced an increase to the level of income that can be earnt before ‘tapering’ applies. Both, the adjusted and threshold income levels increased by £90,000, with effect from 6 April 2020 (2020/21 tax year) making them £240,000 and £200,000 respectively. This means that those individuals with a threshold income of between £110,000 and £200,000 and adjusted income between £150,000 and £240,000 will no longer be impacted by the tapered annual allowance.

The taper works by reducing a person’s AA by £1 for every £2 of adjusted income over £240,000, however those with a threshold income of £200,000 or less will be exempt from the taper no matter their level of adjusted income. The AA can only be tapered down to a minimum of £4,000 – for those with an adjusted income above £300,000.

For more information on ‘tapering’ please see Briefing Note 6 Measuring income.

Pension Savings Statements (PSS’s) are only issued to members who we identify as having exceeded the standard AA, which has remained at £40,000 since the 2016/17 tax year. There will be members who may not know what their AA is until after the end of the tax year in question and therefore will not know where they fall within the tapered range. Members can request a PSS at any time.

As a result of the introduction of ‘tapering’ the Department for Education made the decision to allow voluntary scheme pays for the 2016/17 PIP onwards, to help alleviate the burden of the costs arising from ‘tapering’. 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: 20/04/2020 12:37

Form

Apply for us to pay an Annual Allowance charge on your behalf

Download form

Calculators

Stay on track with the Annual Allowance limit.

Calculate

FAQ

Find out how your pension fits into your working life

Read our FAQs

A to Z