HMRC has published a guide to pension scheme rates for the tax year 2016/17, confirming the capping of the standard lifetime allowance at £1m, while the annual allowance stands at £40,000. From 6 April 2016 the annual allowance is reduced if the taxpayer’s income for the tax year is more than £150,000. The annual allowance is reduced by £1 for every £2 of income above £150,000, subject to a minimum reduced annual allowance of £10,000
Any amount of pension savings over the annual allowance will be liable to the annual allowance charge.
Tax relief on pension contributions remains limited to the higher of 100% of UK taxable earnings or £3,600.
The money purchase annual allowance applies where the scheme member has flexibly accessed any of their pension benefits. This is set at £10,000 for 2016/17.
The alternative annual allowance applies to scheme members who have pension savings in both defined benefits and defined contribution arrangements and have flexibly accessed their money purchase pension benefits and made money purchase pension savings in excess of the money purchase annual allowance. The maximum allowance is £30,000, but this may be lower if the member’s annual allowance is reduced.
The guidance also lists the tax charges on payments from registered pension schemes in a variety of circumstances.
Rates at a glance
Standard lifetime allowance
Tax year | Amount (£) |
|---|---|
2016 to 2017 | £1,000,000 |
2015 to 2016 | £1,250,000 |
2014 to 2015 | £1,250,000 |
2013 to 2014 | £1,500,000 |
2012 to 2013 | £1,500,000 |
2011 to 2012 | £1,800,000 |
Annual allowance
Tax Year | Amount (£) |
|---|---|
2016 to 2017 | £40,000 |
2015 to 2016 | 6 April 2015 to 8 July 2015 - £80,000 |
2014 to 2015 | £40,000 |
2013 to 2014 | £50,000 |
2012 to 2013 | £50,000 |
2011 to 2012 | £50,000 |
From 6 April 2016 your annual allowance will be reduced if your income for the tax year is more than £150,000.
Tax charges on payments from registered pension schemes
Charges | Rates |
|---|---|
Lifetime allowance charge | 55% - if amount over lifetime allowance paid as a lump sum |
Annual allowance charge | Marginal rate of income tax |
Unauthorised payments charge | 40% |
Unauthorised payments surcharge | 15% |
Short service refund lump sum charge | 20% on first £20,000 |
Special lump sum death benefits charge | 45% |
Authorised surplus payments charge | 35% |
Serious ill-health lump sum charge | 45% |
Scheme sanction charge | 15% to 40% |
Further information
The HMRC guidance, Rates and allowances - pension schemes is here
