Pensions Tax - Annual and Lifetime Allowances
Annual Allowance factsheet (PDF 463KB) April 2020
The Annual Allowance, which is set by HM Revenue and Customs (HMRC), is the amount by which the value of your pension benefits may increase in any one year without you having to pay a tax charge.
The assessment covers any pension benefits you may have in any tax registered pension arrangements where you have been an active member of the scheme during the tax year.
The Government reduced the Annual Allowance limit from £255,000 to £50,000 from 6 April 2011 and then reduced it again to £40,000 from 6 April 2014. Further changes to the Annual Allowance were made from 6 April 2016, which resulted in special transitional rules for the 2015/16 tax year.
You are usually only subject to an annual allowance tax charge if the value of the pension growth in a tax year is more than £40,000, although for high earners the allowance may be lower. Please contact Bedfordshire Pension Fund if you think you may be affected by this.
There is also a three year carry forward which allows you to carry forward unused annual allowance from the last three years. The gov.uk website has more information on tax and your pension.
Bedfordshire Pension Fund will inform all active members of the Local Government Pension Scheme of the amount of the Annual Allowance within the Bedfordshire Pension Fund. It is the responsibility of the member to include this information on their Self Assessment tax return together with any other pension arrangements..
You can click here to view a short video about annual allowance.
Lifetime Allowance factsheet (PDF 431KB) April 2020
The Lifetime Allowance is set by HMRC and is the total value of all pension benefits a person can have without triggering an excess tax charge. In April 2014 there was a reduction to the Lifetime Allowance (LTA), from £1.5 million to £1.25 million and a further reduction to £1 million from April 2016. From April 2018 the LTA has increased each year in line with inflation and is £1,073,100 for the 2020/2021 tax year.
You can click here to view a short video about lifetime allowance.