RPSM06300010 - Scheme Administrator pages: Annual allowance: Overview

Overview

There are no limits on the amount of contributions, unless imposed by scheme rules, which can be paid into a registered pension scheme but tax relief on contributions made by a member will be limited to the higher of £3,600 or 100% of earnings. There is also a limit in most tax years (see RPSM06100090 and RPSM06100100 for exceptions) on the amount of tax privilege that is available on the amounts contributed or rights accrued. This is known as the annual allowance and if it is exceeded the scheme member (not the scheme administrator) will be liable to tax on the excess.

As scheme administrator you may be asked by the member to provide a statement setting out the increase in a member’s fund as a result of contributions made or increases in their pension rights. This will allow the member to calculate if they need to declare on their self-assessment tax return that they are liable to tax. You should also note that in a money purchase arrangement, the member would have a statutory right under DWP legislation to seek an illustration of benefits.

Otherwise your involvement with the annual allowance should relate only to the setting of the pension input period in certain pension schemes.

The annual allowance for the tax year 2006-2007 is £215,000

The annual allowance test is by reference to a pension input amount in a pension input period ending in the tax year concerned. The test applies separately for each arrangement within a scheme.