What is tapered annual allowance?

Back to results

Although the annual allowance remains at £40,000, from 6 April 2016 a tapered annual allowance applies to higher earners. Individuals who have an adjusted income greater than £150,000 and whose threshold income is greater than £110,000 will see their annual allowance reduced. For every £2 of adjusted income over £150,000, their annual allowance will be reduced by £1, subject to a remaining annual allowance of not less then £10,000. In other words, anyone subject to the taper whose adjusted income is £210,000 and over will have an annual allowance of £10,000. If you're subject to the money purchase annual allowance (MPAA) rules because you (flexibly accessed benefits under a money purchase arrangement since 6 April 2015), your MPAA will be £10,000, even if that is all of the annual allowance you have because of the taper.

If you think you're affected by this please speak to a financial adviser.

Adjusted income includes

· taxable income, which includes employment        income, most pension and savings interest income  plus any share, rental or trust income, less certain  reliefs;

· the value of employer pension contributions;

· the amount of any excess relief on personal    contributions to a net pay scheme;

· the amount of any pension contributions  deducted from pay in relation to a net pay  scheme;

· certain relief claimed by non-domiciled individuals  in relation to contributions to overseas pensions  schemes, less 

· the amount of certain lump sum death benefits.

Threshold income includes

· taxable income;

· any salary sacrificed in return for pension  contributions on or after 9 July 2015, less

· the gross amount of any relief at source  contributions and the amount of certain lump sum  death benefits.