There is no limit on the amount that may be contributed to a registered pension scheme, but a tax charge may apply if payments are made in excess of the annual allowance. The maximum amount on which an individual can claim tax relief in any tax year is the greater of the individual's UK relevant earnings or £3,600.
If total pension input exceeds the annual allowance of £50,000 there is a tax charge at 40% on the excess. This is subject to transitional provisions and utilising unused allowances from previous years. Total pension input is the increase in value of the aggregate of all of the individual’s pension savings. The pension input period is usually the year to the anniversary date which falls within the relevant tax year.
|Maximum age for tax relief||74|
|Minimum age for taking benefits||55|
|Lifetime allowance charge||- lump sum paid||55%|
|- monies retained||25%|
|on cumulative benefits exceeding||£1,500,000*|
|Maximum tax-free lump sum||25%|
|*Subject to transitional protection for excess amount.|
The lifetime allowance for pension contributions will reduce from £1.5 million to £1.25 million. At the same time the annual allowance will reduce from £50,000 to £40,000.