HMRC limits

The Lifetime Allowance

The Lifetime Allowance (LTA) is the maximum amount of all the pension saving you build up over your life that benefits from tax relief. If you build up pension savings worth more than the lifetime allowance you'll pay a tax charge on the excess.

For 2017/18 tax year, the LTA was £1m.  The Governement intends to index the standard LTA annually in line with the Consumer Prices Index (CPI) from 6 April 2018.

The LTA will include not only the benefits in the Scheme, but also any other occupational pension arrangements in which you have participated with this or previous employers, any personal or stakeholder pensions you may have, or any such arrangements that you may join in the future. However, it excludes State pension entitlements and pensions payable on your death.

The value of your pension benefits from all registered pension schemes is converted into a fund value and compared to the LTA that is applicable at the time of taking your benefits.  The fund value is calculated by:

  • taking the fund values relating to all your defined contribution pension arrangements (such as the RSA Pension Scheme);
  • multiplying your pension benefits from any defined benefit pension arrangements (such as the Sal pension scheme or RIGPS) by 20, or by 25 if the pension was in payment before 6 April 2006; and
  • adding all these figures together. 

The Annual Allowance

The Annual Allowance (AA) is the amount of pension benefits that can accrue and/or the amount that can be paid to an individual's pension arrangement(s) each year without an immediate tax charge arising for the individual. The standard allowance for 2018/19 is £40,000.  The tapered annual allowance may reduce this amount to £10,000 depending on your earnings.

The period over which the Annual Allowance is measured is called the Pension Input Period (PIP). The RSA Pension Scheme's PIP is in line with the tax year, i.e. 6 April to 5 April.

Your pension contributions (including RSA's employer contributions) to the RSA Pension Scheme in a PIP are tested against the AA set for the tax year.

The AA covers all of an individual's pension savings, except State Pensions, so any other pension savings, e.g. Additional Voluntary Contributions (AVCs) or a personal pension will need to be added to the amount paid into your RSA pension.  Please note that, if you have any defined benefit pensions, these are tested against the AA in a different way.  Further information can be obtained from the RSA Pensions Administration Team (see Contact Points).

These allowances will not affect the vast majority of members. If you think you are affected and would like further information contact the RSA Pensions Administration Team.

For further information see the HMRC website: on your private pension/annual allowance


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