The annual allowance is a limit on the value that your pension benefits can grow by in a tax year. You may have to pay a tax charge if your pension value goes over the limit.
The current limit is £40,000 (unchanged for the 2021/22 tax year). You’re more likely to breach the limit if you’re a high earner, or you’ve received a promotion.
How it works
You may have to pay a tax charge if the total value of your pension on 5 April has increased by more than £40,000 when compared to the value of your pension on the previous 6 April.
Most members who breach the limit are protected from the charge. Any unused annual allowance from the previous 3 years can be carried forward to use this year.
If you’ve breached the annual allowance limit
We'll write to you by 5 October and issue you with a pension saving statement based on the information we hold. A pension saving statement is a record of the amount of pension you've built up in our fund during the previous tax year.
We can only base the information we send you about annual allowance on your Local Government Pension Scheme (LGPS) pension with ourselves. You may wish to seek independent financial advice if you have any other pensions.
You can read the 'annual allowance factsheet' on the national LGPS member website where a quick check calculator is also available.
Video: Your annual allowance
This video explains the government limits on the amount of pension that can be built up in a year, tax charges, pension savings statements and carry forward. For subtitles select ‘CC’ (closed captions).