What the annual allowance covers
The annual allowance limits the total pension savings that can benefit from tax relief in a single tax year. It applies across all of a client’s registered pension schemes — personal contributions, employer contributions and defined benefit accrual all count towards the same limit.
Where a client’s total pension input exceeds the allowance, the excess is subject to the annual allowance charge, which claws back the tax relief. The charge is at the client’s marginal rate and is reported through self-assessment — or, where the conditions are met, paid from the pension under scheme pays.
Common pitfalls in practice
- Relying on the standard allowance without checking for tapering on high earners.
- Missing defined benefit accrual when estimating total pension input.
- Overlooking that the MPAA removes carry forward for money purchase contributions.
- Assuming employer contributions sit outside the allowance — they don’t.
Interaction with carry forward and tapering
Two adjacent rules change the effective allowance. Carry forward lets a client use unused allowance from the three previous tax years, while the tapered annual allowance reduces the limit for high earners. Both need to be checked before recommending a large single contribution.
See Templi in action
See how Templi connects meetings, firm-standard templates and suitability reports, so your team can spend less time on admin and more time with clients.