The Annual Allowance, which is set by Her Majesty’s Revenue and Customs (HMRC), is the amount by which the value of your pension benefits may increase in any one year without you having to pay a tax charge.
The assessment covers any pension benefits you may have in any tax registered pension arrangement, where you have been an active member of the scheme during the tax year.
You are usually only subject to an annual allowance tax charge if the value of the pension growth in a tax year is more than £40,000, although for high earners the allowance may be lower. Please contact Cheshire Pension Fund if you think you may be affected by this.
There is also a three year carry forward which allows you to carry forward unused annual allowance from the last three years. The gov.uk website has more information on tax and your pension.
Life Time Allowance
The Lifetime Allowance is the limit on the amount of pension benefits that can be paid from your pension without triggering an extra tax charge.
The current limit is £1.055 million (2019/20). This means that if your pension savings are close to or over £1.055 million you may have to pay an additional tax charge.