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Introduction

As discussed in the Annual allowance guidance note, 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 (for defined benefit schemes), plus

2. •

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

The total of these figures is the pension input amount.

If the pension input amount exceeds the annual allowance (£60,000 from the 2023/24 tax year onwards), there is a tax charge on the excess (known as the annual allowance charge) on the member.

The purpose of the annual allowance is to set a limit on the extent to which people are able to accumulate additional tax privileged pension funds each year.

In order to reduce the risk of funds being recycled as a consequence of the introduction of the more flexible benefits regime with effect from 6 April 2015, a new form of annual allowance was introduced for those who decide to take benefit in