Teachers' Pensions
Annual Allowance

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

Due to the alignment of the PIP with the tax year part-way through the year, HM Treasury introduced transitional rules for the 2015/16 tax year. For more information on the transitional rules, see our Annual Allowance Factsheet.

The AA was reduced for people with an ‘adjusted income’ of more than £150,000 from 6 April 2016, impacting the 2016/17 Pension Input Period onwards. The method of reduction is called Tapered Annual Allowance (TAA). This is calculated by reducing a person’s Annual Allowance by £1 for every £2 of adjusted income over £150,000. This is subject to a minimum Tapered Annual Allowance of £10,000 on all Adjusted Incomes in excess of £210,000.

There is an exemption for members whose threshold income is less than £110,000.

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

Pension Savings Statements are only issued to members who we identify as having exceeded the standard Annual Allowance, which is currently £40,000. Some members 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 Pension Savings Statement at any time.

As a result 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 retrospective Voluntary Scheme Pays elections.

We’ve created a series of briefing notes to help you understand the changes.

Last Updated: 26/07/2019 08:13


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