General principles: overview of pensions taxation: annual allowance and lifetime allowance charges
Sections 227 and 214 Finance Act 2004
There is no limit on the amount of pension saving an individual can build up in a registered pension scheme nor is there an absolute limit on the amount of benefits such a scheme can provide.
However, the following two key controls limit tax relief on pension savings.
The annual allowance
The annual allowance effectively limits the amount of tax relief on an individual’s pension savings in a tax year. If the increase in tax relieved pension savings exceeds the annual allowance for a tax year, an annual allowance charge will arise in respect of the excess amount (see PTM050000).
The lifetime allowance
The lifetime allowance limits the amount of benefits an individual can draw from all registered pension schemes in their lifetime, and in certain circumstances, the benefits that can be provided from such schemes on their death, without triggering the lifetime allowance charge (see PTM080000).