RPSM15102080 - Technical Pages: Special annual allowance: Amount

This guidance only applies for the 2009-10 and 2010-11 tax years.

Example 1 of individual who has made both infrequent contributions in the last 3 tax years and having continuing regular pension saving that is a protected pension input amount

Justin has relevant income for the 2009-2010 tax year of £160,000. As the amount of his relevant income for the 2009-2010 is £150,000 or more he must then use 22 April 2009 as the date for determining whether pension input amounts are protected for the purpose of the special annual allowance.

Justin has made infrequent money purchase contributions to a defined contribution (DC) pension scheme (i.e. to an other money purchase arrangement) in the 3 tax years ending on 5th April 2009. The relevant mean of those infrequent money purchase contributions is £40,000.

He also has benefits accruing under a defined benefits pension scheme that have continued to accrue since before 22 April 2009 and the basis on which the benefits have continued to accrue has not changed during the 2009-2010 tax year. The pension input amount relating to these defined benefits is a protected pension input amount and the amount of that input for the 2009-2010 tax year is £15,000. This is the only protected pension input amount that Justin has for the 2009-2010 tax year and Justin has not made any infrequent money purchase contributions in the period beginning with 6 April 2009 and ending on 22 April 2009 - i.e. there have been no ‘pre-22 April 2009 pension input amounts’.

As Justin has made infrequent money purchase contributions and the relevant mean of those contributions is £40,000, his special annual allowance for 2009-2010 (and 2010-2011) would normally be £30,000. However, because of the protected pension input amount of £15,000 for 2009-2010 his special annual allowance for that tax year is reduced to £15,000 (being £30,000 - £15,000).

During the period beginning with 22 April 2009 and ending on 5 April 2010, Justin made further contributions to his DC pension scheme of £15,000 (the basis on which they were made was immaterial).

Justin’s total pension input amount for the 2009-2010 tax year is £30,000 (the value of the accrual under the defined benefits scheme plus the contributions to the DC scheme). His total adjusted pension input amount is £15,000 (the total input amount less the amount of the value of the defined benefit accrual, which is a protected pension input amount).

Justin’s total adjusted pension input amount of £15,000 does not exceed his special annual allowance of £15,000 for the tax year. As a consequence Justin has not exceeded his special annual allowance for the year so does not have any special annual allowance charge liability for that year.

In the 2010-2011 tax year the benefits under the defined benefits scheme continued to accrue on the same basis. However, the accrual of those benefits stopped during the tax year, which resulted in a reduced protected pension input amount in relation to those benefits of £5,000. That was the only protected pension input amount Justin had for that tax year. Therefore, Justin’s reduced special annual allowance for 2010-2011 is £25,000 (being £30,000 - £5,000).