Annual allowance

While there is no limit on the amount that can be saved into your pensions each tax year, there is a limit on the total amount that can be saved tax free, before a tax charge might apply. That is the annual allowance.

How much is the AA?

The current AA is £60,000 a year and applies across all your pension savings, not per pension scheme. This is made up of employer contributions plus any contributions you make.

If the amount paid into your pension over a tax year is more than the annual allowance  you will likely incur a tax charge.

Find out more about the annual allowance here.


What is the tapered AA?

If you’re on a higher income your pension savings might be subject to the tapered AA. For the 2023/24 tax year, this will start to apply if you have a threshold income (which includes all taxable income, including investment income and benefits in kind, but excludes pension contributions) of over £200,000, or an adjusted income (like threshold income, but including pension contributions) of over £260,000.  

How does the tapered AA work?

For every £2 of adjusted income you earn over £260,000, your AA reduces by £1. This tapering stops when your AA reaches £10,000. If you’re affected by the taper and the contributions paid into your pensions exceed your reduced AA you may have to pay a tax charge on the amount above your tapered AA.

The charge is normally declared and paid through your end-of-year tax return, although you can ask as for it to be paid directly from your individual account if certain conditions are met. This is known as ‘Scheme Pays’. If you want use this option, please let Aptia know by the 30 November before the deadline for payment - to allow sufficient time for the forms to be completed and the money to be disinvested from your account.

To get further help on how your pension benefits compare against the AA, please contact Aptia. For more general information on the AA, visit the MoneyHelper website. This is a personal tax issue. The information provided here is designed to help you but does not cover all the detail. If you’re unsure, we recommend that you take financial advice.

What about the defined benefit (DB) section?

The DB section closed in 2011, so members are no longer making contributions, and the AA does not apply.