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HMRC internal manual

Pensions Tax Manual

Annual allowance: essential principles: annual allowance changes during a pension input period

 

Changes to annual allowance for tax year 2011-12

Paragraph 28 Schedule 17 Finance Act 2011 

A lower annual allowance figure of £50,000 for tax year 2011-12 was announced on 14 October 2010.

At that time, individuals may have had pension input periods that started before 14 October 2010 but ended in the 2011-12 tax year with pension savings built up before that date made on the basis of the previous annual allowance figure of £255,000 for 2011-12.

There were special rules where an individual’s total pension input amount for tax year 2011-12 exceeded £50,000 with some of that input amount built up before 14 October 2010 and the remaining part on or after that date.

For guidance on those special rules, see the Registered Pension Schemes Manual on the National Archives website (external users please refer to: [http://webarchive.nationalarchives.gov.uk//http://hmrc.gov.uk/manuals/r…](http://webarchive.nationalarchives.gov.uk//http://hmrc.gov.uk/manuals/rpsmmanual/RPSM00100000.htm)).

Reduction of annual allowance from tax year 2014-15

There are no such special rules to cover the reduction of the annual allowance to £40,000 for 2014-15 as the reduced amount was known ahead of pension input periods that started in 2013-14 but would end in 2014-15.

Changes to annual allowance from tax year 2015-16

Money purchase annual allowance

Sections 227B to 227G Finance Act 2004

With effect from 6 April 2015 a money purchase annual allowance might apply for individuals who flexibly accessed a money purchase arrangement.

Special rules apply for money purchase arrangements when an individual first flexibly accesses a money purchase arrangement during a tax year (‘the tax year’).

Pension input amounts for such arrangements are not tested against the £10,000 ‘money-purchase input’ allowance where the pension input period for that arrangement ends in the tax year but before the date of first flexibly accessing. The pension input amount is, instead, tested as part of the ‘other inputs’.

Part of the pension input amounts for such arrangements are tested against the £10,000 ‘money-purchase input’ allowance where the pension input period for that arrangement ends in the tax year (or the next tax year) and the pension input period contains the date of first flexibly accessing. The pension input amount is apportioned on a ‘pre-first flexibly accessing’ and ‘post-first flexibly accessing’ basis. The ‘post’ part is tested against the £10,000 ‘money-purchase input’ allowance and the ‘pre’ part is tested as part of the ‘other inputs’.

Aligning pension input periods

Sections 228C, 237ZA, 238ZA & 238ZB Finance Act 2004

On 8 July 2015 it was announced that pension input periods would be changed so that they all match the tax year (i.e. run from 6 April to 5 April) with effect from 6 April 2016.

Transitional rules apply for tax year 2015-16 to ensure that all pension input periods are aligned and are tax year based with effect from tax year 2016-17.

PTM058000 has more information about the transitional rules.