Pension allowance and pensionable pay cap

If you are likely to be affected by the tax consequences of the annual allowance you may choose to have your pensionable pay capped to minimise the chance of you incurring the tax charge.

To compensate you for giving up part of your pensionable pay the company would pay you a pension allowance in the form of a cash top-up to your salary.

The pensionable pay cap is £165,000 for the Plus section (£250,000 Standard section). The pension allowance is based on pensionable pay above the cap and is subject to income tax and National Insurance contributions.

The pension allowance will end when you cease to build up benefits under the scheme, leave employment or take your pension, whichever is earlier.

Alternatively, you could choose not to have your pensionable pay capped in which case you would be personally responsible for the tax liability.

We will provide you with information to help you complete the relevant section of your annual self-assessment tax return.

If your liability is £2,000 or more in any tax year, you can ask the trustees to pay the tax charge on your behalf from your benefits.