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Introduction

There is no limit on the amount that can be invested in a registered pension scheme by a member or their employer, but there is a limit on the amount that is eligible for tax relief each year which is dealt with through the process associated with the annual allowance. See the Annual allowance guidance note for current rates.

A pension input amount (PIA) beyond the annual allowance may result in a tax charge known as the annual allowance charge unless there is carry forward from previous years available as detailed in the Annual allowance guidance note. The purpose of the annual allowance tax charge is to remove tax relief on any PIA that has been made which exceeds the member’s available annual allowance in the relevant tax year.

The annual allowance charge is defined in FA 2004, s 227 as:

“(1) A charge to income tax, to be known as the annual allowance charge, arises where ―

1. a)

   the total pension input amount for a tax year in the case of an individual who is a member