The Annual Allowance for pension contributions is the amount each individual can save into a pension and receive Tax Relief each year.
The maximum payable into a pension is £40,000.
An annual income of over £150,000 the allowance will be reduced. Called “THE TAPER” which is reduced by £1 for every £2 of adjusted income above £150,000. It can be reduced down to a minimum allowance of £10,000.
You can choose to reduce your pension contributions or your employer’s or face paying an annual charge.
In the 2015-16 tax year, 8,890 individuals reported breaching the allowance. They paid £19,933 in average excess. By the following year, this figure had doubled to 18,930 reported cases paying an average charge of £29,635 ( Source HMRC).
The application of the pension taper rules can be complex, so it pays to take advice!