Annual and Lifetime Allowances

Annual Allowance

The Annual Allowance is a limit, set by the Government, on how much pension savings you can build up tax free in any one tax year while still benefiting from tax relief. 

For most people, the Annual Allowance for the 2023/24 tax year is £60,000 (an increase from £40,000 for the previous three years) but if your total taxable income (all earnings plus investments) is over £260,000, it may be lower. If you exceed the Annual Allowance, the excess amount will be added to the rest of your taxable income for the tax year and will be subject to income tax at the rate(s) that apply to you.
You can carry forward unused Annual Allowance from the previous three tax years to give you a larger allowance in 2023/24.  For example, if a member has an unused Annual Allowance of £15,000 from 2020/21, £5,000 from 2021/22 and £10,000 from 2022/23, this increases their Annual Allowance to £90,000 for 2023/24 (i.e. £60,000 plus £30,000 carry forward from the previous three years).  To help you work out your Annual Allowance for a specific tax year, you can use the Government’s calculator.
Members do not usually build up further pension savings in the Scheme, however any 103 restoration pension will likely result in pension savings for deferred pensioners in one tax year (the 2023/24 tax year) only.

The Money Purchase Annual Allowance
If you have previously taken any defined contribution/money purchase retirement income flexibly, your future money purchase savings will be subject to the Money Purchase Annual Allowance of £10,000.
This can affect your Annual Allowance for building up defined benefit pensions (such as your main Scheme pension including any additional pension in relation to restoration awards). If your money purchase savings exceed £10,000 for 2023/24, your Annual Allowance for defined benefit pension arrangements may be reduced by £10,000 to £50,000 (subject to any available carry forward or restriction if your taxable income is over £260,000).
Your pension provider should have told you if you are already subject to the Money Purchase Annual Allowance. 
Lifetime Allowance
The Lifetime Allowance is a limit on the total value of all your pension benefits when you start taking your pension. If you go over this limit, you will generally have to pay a tax charge on the extra.
The standard Lifetime Allowance is £1,073,100.
The Lifetime Allowance is proposed to be abolished from the 24/25 tax year. No Lifetime Allowance charge will be applied in the 23/24 tax year.
The Lifetime Allowance takes into account all the pension benefits you get from this Scheme and from any others you are in. It doesn’t include your State Pension.
When you start taking your pension, you must tell the Pensions Office the total value of any other pension benefits you have. We will then be able to see if you might be going over the Lifetime Allowance.
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