Pensions & Tax

Your pension contributions are not taxed and you will only pay tax on your pension once it comes into payment. However there are tax limits on how much pension you can build up in a year (Annual Allowance) and over your life (Lifetime Allowance). 

Annual Allowance

Annual Allowance is simply a limit on how much pension you can save in any one year before you pay a tax charge. The Annual Allowance limit for most members is £40,000 per year (higher earners, over £200,000 per year, may have a lower allowance). Most members are not affected by the Annual Allowance limit.

Annual Allowance covers all pension benefits you have, in any, and all pension schemes you have paid into over the financial year. It includes both the contributions from yourself and your employer.

The Fund will write to any members whose Local Government Pension Scheme (LGPS) benefits are close to or exceed the Annual Allowance limit. If you have a pension with another Pension Scheme or provider (excluding the state pension) you must add all your pensions together to see if you have exceeded the Annual Allowance. It is your responsibility to monitor whether or not you exceed the limit.

Find out more in the Annual Allowance factsheet below.


Lifetime Allowance

Lifetime Allowance is the total value of all pension benefits you can have without triggering a tax charge. If the value of your pension benefits when you draw them is more than the Lifetime Allowance, you will have to pay tax on the excess. The Lifetime Allowance is currently £1,073,100.

Lifetime Allowance includes all pension savings, from all Schemes or Pension plans you have contributed to. Most members are not affected by the Lifetime Allowance but if you are there is protection available from HMRC. You can find out more in the Lifetime Allowance factsheet below.

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