Annual allowance

An annual allowance applies to any increase in your scheme benefits during the year.

This is called your "pension input" and also includes any payments you have made to defined contribution pension plans over the year such as your AVC account or a personal pension plan.

If your pension input is higher than the annual allowance you will be taxed on the extra at your marginal rate of income tax.

We will measure the increase in value of your scheme benefits for each pension input period (PIP), which is the year ending 31 March.

The annual allowance from 6 April 2011 is £50,000 and is expected to remain at this level for at least five years. You can carry forward up to three consecutive years’ unused annual allowance to the current PIP. This must include the previous year’s unused annual allowance.

You can find out more about the lifetime allowance on the HMRC website.