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Pensions Tax Relief

Annual Allowance

There is a limit on the value of pension savings individuals may make or earn in a year; this is known as the Annual Allowance.

From 6 April 2011 the Annual Allowance has reduced from £255,000 to £50,000 each year, with a further reduction to £40,000 from 2014/15.  For tax relief purposes this is measured over a twelve month period known as the Pension Input Period (or PIP).  For administrative simplicity it has been decided to align the PIP for the Universities Superannuation Scheme (USS) with the tax year (6 April - 5 April).  

Further information can be found at https://www.gov.uk/tax-on-your-private-pension/annual-allowance

 

Lifetime Allowance (Retirement Benefit)

There is a limit on the value of retirement benefits that you can draw from approved pension schemes before tax penalties apply.  This limit is called the Lifetime Allowance (LTA). 

From April 2012, the LTA will reduce from £1.8 m to £1.5 m per tax year, with a further reduction to £1.25 m from 2014/15.  The vast majority of pension scheme members will not be affected by this change.  To receive benefits of more than the lifetime allowance you would need:

  • to have saved more than £1.5 million in money purchase schemes (£1.25 m from 2014/15); or
  • be entitled to a pension of around £65,000 per annum (£54,000 from 2014/15), with a separate lump sum of 3 times your annual pension.

Further information can be found at: https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance