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HMRC internal manual

Pensions Tax Manual

Annual allowance: pension input amounts: valuation assumptions: pensionable earnings

Glossary PTM000001

Section 277 Finance Act 2004

A different definition of final pensionable salary can apply depending on whether looking at the leaving service or retirement rule for a pension scheme. This might be for reasons connected with preservation. For example, one definition might use rate of salary and one definition might use an averaged salary.

The valuation assumptions require the pension entitlement to be considered as if the member had reached the age at which no early retirement reduction would apply. The definition of pensionable salary used within the annual allowance valuation process should reflect the member’s actual status at the relevant date i.e. the salary definition for an active member reaching the age for drawing an unreduced retirement benefit should be used until such time as a member has actually left service.