Since 6th April 2016, the Annual Allowance is tapered for certain individuals, so the Carry Forward calculator is in 2 parts;
- – The first part calculates the 2021/22, 2020/21, 2019/20, and 2018/19 (& potentially 2017/18 & 2016/17) ‘tapered’ Annual Allowance which depends on the clients’ income, and
- – the second part calculates the Carry Forward amount of any unused Annual Allowance available.
1. Tapered Annual Allowance
Tax relieved pension savings will be reduced for those with ‘adjusted income’ of over £240,000 p.a. (2021/22 & 2020/21) and £150,000 for earlier years
The Annual Allowance will be reduced by £1 for every £2 income over ‘adjusted income’ limit with a maximum reduction of £30,000. This means that Annual Allowance will reduce from £40,000 pa to £4,000 pa (2021/22 & 2020/21) and £10,000 pa for earlier years.
The ‘adjusted income’ definition adds-back any pension contributions, to prevent individuals from avoiding the restriction by exchanging salary for employer contributions.
However, to provide certainty for individuals with lower salaries who may have one off spikes in their employer pension contributions, a threshold limit of £200,000 (2021/22 & 2020/21) and £110,000 for earlier years will apply.
If the individual’s net income is no more than the threshold income limit (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 2021/22, 2020/21, 2019/20, 2018/19 & 2017/18 which, together with the pension contributions input, will be used in the second part.
2. Carry Forward
Using information input on the income page, this will indicate the amount of unused contributions that can be paid in respect of a client to Money Purchase schemes for 2021/22 based upon Pension Input Amount paid in the previous years.
The calculator does not cater for the input of Defined Benefit pension amounts or individuals who have triggered the Money Purchase Annual Allowance (MPAA).