What is the annual allowance?
Updated 29 March 2016
The annual allowance is a limit on the amount that can be contributed to your pension each year, while still receiving tax relief. It's based on your earnings for the year. Special rules applied for 2015/16, please speak to a financial adviser for more details. The annual allowance for the 2016/2017 year onwards is capped at £40,000.
If your yearly pension savings on all of your registered pension schemes are more than the limit set by the government, plus any unused allowance you can carry forward, there may be a tax charge to pay on the excess. You can carry forward unused annual allowance from the previous three tax years.
Find out more information on the annual allowance limits.
A new reduced money purchase annual allowance (MPAA) of £10,000 relating to money purchase pension contributions applies to individuals who have flexibly accessed their pension benefits. Find out if the MPAA applies to you.