The Annual Allowance is currently £60,000. It is the total amount you can pay into all of your pension arrangements each tax year before tax will be charged. Each £1 of annual Defined Benefit pension built up is treated as £16 for this purpose.

You’ll get a statement from your pension provider telling you if you go above the Annual Allowance in that particular arrangement.

You can carry forward any unused Annual Allowance for up to three years.

Railpen held a seminar for DB members who were sent a pension saving statement for 2022/23.  You can view a copy of the presentation slides here. 

Copies of the 2022/23 factsheets that were included with the statements can also be viewed below.

Annual Allowance Factsheet - ESPS members

Annual Allowance Factsheet - Ex-UUPS members

The Money Purchase Annual Allowance (MPAA) is currently £10,000.

The Money Purchase Annual Allowance only comes into effect if you have already taken some of your defined contribution savings as cash or a short-term annuity from a flexi-access drawdown fund, cash from a pension pot (‘uncrystallised funds pension lump sums’) or if you have taken more than the limit from a capped drawdown fund.

The MPAA is the total amount you can pay into any defined contribution pension arrangement (such as the Lifesight Master Trust) each tax year before tax will be charged.

Your Annual Allowance will only be tapered if you are a high earner and your ‘adjusted income’ (your taxable income plus your Pension Input Amount) is £260,000 or more and your taxable income is over £200,000.

For every £2 of adjusted income over £260,000, your Annual Allowance reduces by £1 (down to a possible minimum of £10,000).

If your total taxable income is over £200,000, you should check if the Tapered Annual Allowance applies to you.

Historically the Lifetime Allowance (LTA) was the maximum amount you could save into all your pensions throughout your working life before you had to pay tax.

The LTA for most people in the tax year 2023/24 was £1,073,100

In previous years a lifetime allowance charge would have been payable on any pension savings over this amount, but from April 2023 that charge was removed.

Certain lump sums, which would have been subject to a charge, are instead subject to Income Tax at the recipient's marginal rate.

The Lifetime Allowance was abolished in April 2024.

From 6 April 2024, there is a limit of £268,275 on the amount you can take as a tax-free lump sum when you take your pension. This limit won’t affect you if you have Lifetime Allowance protections.

Visit www.gov.uk/tax-on-your-private-pension for more information on all of the allowances.