Annual Allowance Factsheet

HM Revenue and Customs (HMRC) limits the amount of pension savings you can make without having to pay extra tax. This limit is in addition to any income tax you pay on your pension once it is being paid to you.

This limit is referred to as the Annual Allowance (AA). The annual allowance (AA) is the amount by which the value of your pension benefits may increase in a year without you having to pay a tax charge.

If the increase in the value of your pension savings in a year (including pension savings outside of the LGPS) is more than the annual allowance, the excess will be taxed as income.

This factsheet looks at the Annual Allowance and how it works.