Pension Update: Reduction in annual allowance for individuals earning over £150,000

Written by Helen Cole on 10 July 2015

From April 2016, for those individuals with 'adjusted income' over £150,000, the pensions tax relief available will be tapered away to a minimum of £10,000. The adjusted income figure includes adding back any pension contributions to avoid, for example, individuals sacrificing salary for employer pension contributions. The rate of reduction in the annual allowance is £1 for every £2 that the adjusted income exceeds £150,000, subject to a maximum of £30,000. So this means for individuals with income of £210,000 or more, the annual allowance will be reduced to the minimum of £10,000. The carry forward of any annual allowance will be based on the unused tapered amount.

Where possible therefore, it would be advisable to make pension contributions in the current tax year ending on 5 April 2016, as there is a £40,000 allowance available. In addition to this, you are still able to utilise any unused annual allowances from the three previous tax years of £50,000 for 2012/13 and 2013/14 and £40,000 for 2014/15, subject to having sufficient earnings in the current tax year to support the pension payment. Please ensure that you liaise with your financial adviser or pension administrator before making any payments as the Government has made changes to the pension input periods to facilitate the new rules.


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Helen Cole
Private Client Manager