Annual Allowance (AA)

The Annual Allowance is the limit set by the Government on how much you can save in a pension scheme before having to pay tax. For the 2016/17 tax year, the Annual Allowance is £40,000. This amount is reduced further if you have an adjusted income greater than £150,000 and your threshold income is greater than £110,000. The Government looks at a period of time called the Pension Input Period, to see how much the value of your benefits have increased. This increase is known as your Pension Input Amount and is included in your annual Benefit Statement. You need to check that the pension input amounts from all your pension savings do not go above the AA. You may want to speak to an Independent Financial Adviser about this.