The Annual Allowance is the maximum amount that your pension benefits can increase from the 1 April to 31 March, without incurring an excess tax charge. This limit is currently set at £40,000 from 1 April 2014, but was previously £50,000. Should your Pension Input Amount exceed this value, an excess tax charge may be levied.
However, any unused allowance from the previous 3 years can be used to offset this increase. You should also take into account any other pension benefit that you may have when assessing your Pension Input Amount. Benefits arising from Added Pension, transfers received in a previous pension input period and pension debits ordered in a previous pension input period also be considered.
If you believe that you are going to be affected by the Annual Allowance limit, please contact us.