RPSM06200020 - Member Pages: Annual Allowance: What are pension input amounts?

Input amounts

This guidance explains the annual allowance rules up to 5 April 2011. If you want to know how the annual allowance works after that date see the guidance at http://www.hmrc.gov.uk/pensionschemes/annual-allowance/index.htm.

These are the amount of input, being total contributions (including any from the employer) in a money purchase arrangement or the increase in accrued rights, for example 1/60^t h of earnings in a defined benefit arrangement.

These input amounts are those applicable to a pension input period

The increase in accrued rights in a defined benefits arrangement is calculated by multiplying accrued pension at the start of the pension input period by 10, then multiplying the accrued pension by 10 at the end. Any increase between the two is the pension input amount.

But there may be adjustments to the pension input amount so as to ensure the measure of the input is correctly applied.

For example, the following are subtracted when measuring input in a defined benefits arrangement.

• any increase in rights derived from pension credit rights resulting from a pension sharing order 
• transfer payments received from another registered pension scheme 

And the following are added back

• any deduction of rights from a pension debit resulting from a pension sharing order or provision on divorce
• transfer payments made to another registered pension scheme
• amounts crystallised by a benefit crystallisation event (see RPSM06200040)

In a money purchase arrangement (other than a cash balance arrangement) the adjustments described above are not applicable. This is because the input is measured solely by the amount of pension rights.

Contracted Out Contributions

Input in the form of contributions to provide contracted out benefits are not counted for the purpose of the annual allowance test.