Pensions – annual allowance
The annual allowance for tax relief on pensions was reduced to £40,000 (from £50,000) with effect from 6 April 2014. Pension providers are in the process of writing to pension scheme members contributing more than £40,000 per year. Finance Act 2011 legally requires pension providers to send these statements.
HMRC has also recently released an amended version of the pension savings annual allowance calculator. There are two version of the calculator, a standard and enhanced version.
The standard should be used where the pension input amount has been consistently below the annual allowance for the 3 years before the year you wish to test against the annual allowance or where a taxpayer hasn’t needed to consider the use of carry forward for any of the 3 previous tax years.
The enhanced calculator has been created to work out the pension input amount when this isn’t known and will calculate whether there is any unused annual allowance to carry forward for the tax years from 2008 to 2009 to the tax year 2015 to 2016.
The calculator can be used for pension savings using final salary pension, money purchase pension, additional voluntary contributions (AVCs). The calculator can’t be used for career average pensions, cash balance pensions or hybrid pensions. There are also a number of other conditions which must be met in order for the calculator to produce accurate figures.