Tax allowances

A pension is one of the most tax efficient ways to save, but there are some limits:

The Annual Allowance (AA) is the total amount you can save into your pension(s) in a year before being subject to extra tax. For most people this is currently £40,000. If you have unused allowance from the last three years, you could save more than £40,000 without paying additional tax.

If you exceed the AA, we will send you a Pension Savings Statement in October.

Different rules apply if you have a 'threshold income' of more than £110,000 or 'adjusted income' of more than £150,000

Threshold income is the value of your taxable income from all sources (e.g. earnings, benefits in kind, savings interest, dividends, rental income) but excluding the value of any pension savings. However, if you pay your contributions through Flexible Pension Savings, you must add those contributions in when you calculate threshold income.

Adjusted income is the value of taxable income from the same sources but including the value of any pension savings.


The Lifetime Allowance (LTA) is the total amount you can take from all your pension schemes in your lifetime before being subject to extra tax. This is currently £1.03 million.

Details about how much of your AA and LTA you have used are on your annual benefit statement.

The Money Purchase Annual Allowance (MPAA) applies if you flexibly accessed benefits from a Defined Contribution (DC) pension after 6 April 2015. This is the maximum amount you can contribute to DC arrangements before having to pay tax, and includes Scheme Money Purchase Additional Voluntary Contributions (MPAVCs). It's currently set at £4,000. If it applies to you, there will be a tax charge on the excess.