The Annual Allowance is the maximum amount that your pension benefits can increase during the Scheme Year without incurring an excess tax charge. This limit is currently set at £60,000 from 1 April 2023, but was previously £40,000. Should your Pension Input Amount exceed this value, an excess tax charge may be levied.
However, any unused allowance from the previous 3 years can be used to offset this increase. You should also take into account any other pension benefit that you may have when assessing your Pension Input Amount, including any Additional Voluntary Contributions (AVC).
Benefits arising from Added Years, Additional Regular Contributions (ARC), Additional Pension Contributions (APC), transfers received in a previous pension input period and pension debits ordered in a previous pension input period should also be considered.
For more information please read the LGPS Annual Allowance Factsheet (PDF), LGPS Annual Allowance Scheme Pays Information sheet (PDF) and Pensions taxation slides 9 December 2019 (1.37mb PDF).
If you believe that you are going to be affected by the Annual Allowance limit, please contact us.
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