A guide to the tapered annual allowance

Tapered annual allowance can be complex but our guide shows how it could affect you and what happens if you exceed the allowance.
October 2019

Barry Foster

Vice President,
Strategic & Technical Sales

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Risk Disclaimer

This content is based on our understanding of legal and tax regulations and practice at the time of writing (October 2019). It has been produced for information only. We do not provide tax, accounting, regulatory or legal advice. No action must be taken or refrained from being taken based on this content alone.

Key takeaways:

  • What the difference is between threshold income and adjusted income
  • How the value of the employer’s contribution to a defined benefit (DB) scheme is calculated
  • How the tapering affects pension savers

Tapered annual allowance can be complex but our guide shows how it could affect you and what happens if you exceed the allowance.

High-income individuals are defined as those with:

  • An ‘adjusted income’ of over £150,000 for the tax year, and
  • A ‘threshold income’ of over £110,000

The key difference between adjusted income and threshold income is that adjusted income adds back in all the personal pension accruals that threshold income deducts. Plus, it also adds in genuine employer contributions.

Download our guide where we expand on this theme and, via a notional case study, we calculate the value of an employer’s contribution in respect of a defined benefit scheme.

Risk Disclaimer

This content is based on our understanding of legal and tax regulations and practice at the time of writing (October 2019). It has been produced for information only. We do not provide tax, accounting, regulatory or legal advice. No action must be taken or refrained from being taken based on this content alone.