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Introduction

The annual allowance in relation to registered pension schemes is the maximum amount:

1. •

   by which a member’s benefits can increase in a pension input period (PIP) (in respect of defined benefit schemes)

2. •

   that can be contributed to pension arrangements in a PIP (for defined contribution or money purchase schemes)

without risk of the member suffering a tax charge on this increase in a member’s benefits / amounts contributed.

If the annual allowance is exceeded in a tax year, the individual is at risk of suffering a tax charge (the annual allowance charge). See the Annual allowance charge guidance note.

The purpose of the annual allowance is to set a limit on the extent to which people are