From 6th April 2016 Annual Allowance for tax-relieved pension savings will be reduced for those with ‘adjusted net income of over £150,000 p.a.
Annual Allowance will be reduced by £1 for every £2 income over £150,000 with a maximum reduction of £30,000.
This means that Annual Allowance will reduce from £40,000 pa (ANI at £150,000) to £10,000 pa (ANI at or more than £210,000).
The ‘adjusted income’ definition adds back any pension contributions, to prevent individuals from avoiding the restriction by exchanging salary for employer contributions.
To provide certainty for individuals with lower salaries who may have one-off spikes in their employer pension contributions, a net income threshold of £110,000 will apply.
If the individual’s net income is no more than £110,000 (excluding pension contributions) they will not normally be subject to the tapered annual allowance. However, anti-avoidance rules will apply so that any salary sacrifice set up on or after 9 July 2015 will be included in the threshold definition.
This calculator will show whether the Annual Allowance will be restricted, and the expected annual allowance for 2016/17.