PENSION ALLOWANCES

Tax Year: 2021/2022  2020/2021 
Standard Annual Allowance:  £40,000 £40,000
Money Purchase Annual Allowance:  £4,000 £4,000
Tapered Annual Allowance:* Tapered annual allowance applies to those with ‘adjusted income’ of more than £240,000 and ‘threshold income’ of more than £200,000. * Tapered annual allowance applies to those with ‘adjusted income’ of more than £240,000 and ‘threshold income’ of more than £200,000
Lifetime Allowance:

£1,073,100

Maintained at the 2020/2021 level as announced in the Spring Budget.

£1,073,100

Increase in line with the Consumer Price Index (CPI) inflation to £1,073,100 for 2020/21.

Glossary

Standard Annual Allowance

The annual allowance is a limit to the total amount of contributions that can be paid to defined contribution pension schemes and the total amount of benefits that your clients can build up in a defined benefit pension scheme each year, for tax relief purposes.

Money Purchase Annual Allowance

If your clients have flexibly accessed their benefits, the Money Purchase Annual Allowance (MPAA) is the amount that can be paid in one year to their money purchase arrangements without a tax charge applying.

* Tapered Annual Allowance

For the taper to apply, the limits on both must be exceeded. This reduces your clients’ Annual Allowance by £1 for every £2 of adjusted income above £240,000 subject to a maximum reduction of £36,000. The minimum reduced allowance is £4,000. The level of adjusted income at which the maximum reduction in the annual allowance is reached is £312,000.

Lifetime Allowance

The Lifetime Allowance is a limit on the amount of pension benefit that can be drawn from pension schemes – whether lump sums or retirement income – and can be paid without triggering an additional tax charge.