The Government looks at a period of time called the Pension Input Period, to see how much the value of your Cash Balance benefit has increased (in excess of inflation as measured by the Consumer Prices Index).
If you paid Additional Voluntary Contributions during the Pension Input Period, these also count towards your Annual Allowance.
If you are thinking about the Annual Allowance, it’s helpful to know about:
Managing peaks: If you exceed the Annual Allowance in any tax year, you don’t necessarily have to miss out on tax relief. You can carry forward any unused Annual Allowance from the previous three years
The Pension Input Period: This is the period of time the Government used to measure your Annual Allowance. Different members may have different Pension Input Periods. Please get in touch if you want to know more.
Exemptions: Benefits you build up are normally subject to the Annual Allowance – except if you retire in serious ill health (which means where you have a life expectancy of less than one year) or you die.
The Lifetime Allowance is what your pension benefits – from all of your different pension schemes – can be worth before you have to pay any tax charges. The Lifetime Allowance is currently just over £1 million and therefore does not affect the majority of members.
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If you don’t know which section you’re in, contact the Helpline (contact details are at the bottom of the page); or If you recieve an Annual Benefit Illustration the section is noted on the front page.