retirement

Annual Allowances - Pensions Simplification - Maximimum Yearly Pension Contributions

Annual Allowances  

This is the maximum that can be invested in money purchase investment linked pension schemes for an individual during any one tax year.  

Gone are the pecentage of earnings figures and other complex calculations based upon your age and salary as a measure of the maximum you can pay into a pension. 

Broadly speaking, you can invest an amount equal to your yearly salary each year in a pension fund up the maximum yearly limits.  Your employer can technically invest up to the annual allowance, although this may need justifying if you earn £6000 pa and have £255,000 paid into a pension fund by your employer, particularly business controllers and company directors.

The yearly annual allowance limits are as follows:  

For Tax Year 2006/2007 = maximum yearly pensions contributions of £215,000  

For Tax Year 2007/2008 = maximum yearly pensions contributions of £225,000  

For Tax Year 2008/2009 = maximum yearly pensions contributions of £235,000  

For Tax Year 2009/2010 = maximum yearly pensions contributions of £245,000  

For Tax Year 2010/2011 = maximum yearly pensions contributions of £255,000

NEW: For Tax Year 2011/2012 = maximum yearly pensions contributions of £50,000.    PENSION ANNUAL ALLOWANCES WERE BEING  FROZEN UNTIL 2015/2016 at £255,000 however, in October 2010 an anouncement was made that the ANNUAL ALLOWANCE IS REDUCED to £50,000 with effect from April 2011.

** There have also been significant changes to Pension Tax Relief.