Tax Allowances

Annual allowance

The Annual allowance (AA) is the amount by which the value of your Pension benefits may grow (Pension Savings) in any one tax year without you having to pay a tax charge. The standard AA limit has been set at £40,000 since 2016 and rises to £60,000 from 6 April 2023.

If the total value of your Pension Savings in any one tax year, including all Pension Savings in all pension schemes, is in excess of the AA limit, the excess will be taxed as income at your highest marginal rate of tax.

You are most likely to be affected if you:

  • have a lot of membership or pension built up in the Scheme and you receive a significant pay increase, or promotion, and/or;
  • are a high income earner, and/or
  • pay a high level of additional contributions towards your pension, and/or
  • have accessed flexible benefits from another pension scheme on or after 6 April 2015

Hampshire Pension Services will automatically inform you if your Pension Savings in this scheme exceed the standard AA limit in any tax year by no later than 6 October of the following tax year.

For more information on Annual Allowance, see Annual Allowance factsheet or HMRC guidance on Annual allowance.

Standard Lifetime allowance

The lifetime allowance (LTA) is a limit on the total value of your pension savings that you can have without triggering an excessive benefits tax charge.

This includes:

  • your benefits in this scheme, and
  • any pension benefits you may have in other tax-registered pension arrangements

But it does not include state pensions and dependant's pensions.

If the value of your pension benefits, when they come into payment, is more than the LTA, or more than any protections you may have, you will have to pay tax on the excess benefits.

The Chancellor of the Exchequer announced in the 2023 Spring Budget that no one will face an LTA charge from 6 April 2023. (The lifetime allowance was £1,073,100 for the tax year 2022/2023).

The LTA framework remains in place, but the government are intending to remove this in a future finance bill.

The current value of your LTA is shown on your Annual Benefit Statement. If you have specific LTA protections contact Pension Services.