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Posted Fri, 09 Dec 2022 09:31:46 GMT by Jura
Can HMRC please clarify whether the Annual Allowance applies to a defined benefit arrangement (final salary scheme) once that arrangement comes into payment ? Thanks
Posted Mon, 12 Dec 2022 14:37:53 GMT by HMRC Admin 17

Hi,
 
Under a defined benefits arrangement, the individual is promised a certain amount of pension at retirment and does not depend on the size of their pension pot. 

The annual allowance for payments into the pension pot is £40000.00 (less if you earn over £240000.00). 

Any payments to the pension pot above this limit, are subject to income tax and should be report on SA101 supplementary page of a self assessment tax return. 

When a pension becomes payable, individuals usually get 25% of their pensions pot tax free and the rest as payments. 

Thank you.

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