The Annual Allowance is currently £60,000. It is the total amount you can pay into all of your pension arrangements each tax year before tax will be charged. Each £1 of annual Defined Benefit pension built up is treated as £16 for this purpose.

You’ll get a statement from your pension provider telling you if you go above the Annual Allowance in that particular arrangement.

You can carry forward any unused Annual Allowance for up to three years.

Railpen held a seminar for DB members who were sent a pension saving statement for 2022/23. You can view a copy of the presentation slides here.

Copies of the 2022/23 factsheets that were included with the statements can also be viewed below.

Annual Allowance Factsheet - ESPS members

Annual Allowance Factsheet - Ex-UUPS members

The Money Purchase Annual Allowance (MPAA) is currently £10,000.

The Money Purchase Annual Allowance only comes into effect if you have already taken some of your defined contribution savings as cash or a short-term annuity from a flexi-access drawdown fund, cash from a pension pot (‘uncrystallised funds pension lump sums’) or if you have taken more than the limit from a capped drawdown fund.

The MPAA is the total amount you can pay into any defined contribution pension arrangement (such as the Lifesight Master Trust) each tax year before tax will be charged.

Your Annual Allowance will only be tapered if you are a high earner and your ‘adjusted income’ (your taxable income plus your Pension Input Amount) is £260,000 or more and your taxable income is over £200,000.

For every £2 of adjusted income over £260,000, your Annual Allowance reduces by £1 (down to a possible minimum of £10,000).

If your total taxable income is over £200,000, you should check if the Tapered Annual Allowance applies to you.

Historically, the Lifetime Allowance (LTA) was the maximum amount you could build up in all of your registered pension savings throughout your working life before you had to pay additional tax.

The LTA for most people in the tax year 2023/24 was £1,073,100

In previous years a lifetime allowance charge would have been payable on any pension savings over this amount, but from April 2023 that charge was removed.

The LTA was abolished from 6 April 2024.

With the abolition of the LTA there is no limit on the amount of pension savings you can build up. However, new lump sum limits or allowances have been introduced.

This includes the Lump Sum Allowance (LSA) which for most people limits the tax-free cash or lump sum you can receive from all your pensions to £268,275 (the amount being the same as 25% of the LTA at abolition)

If you have an LTA protection, you may have a higher allowance than set out above.

For further details please see the other allowance details below or visit gov.uk

The Lump Sum Allowance (LSA) is a cap on the amount of tax-free lump sum you can receive from all your registered pension arrangements.

The standard LSA is £268,275. If you have an LTA protection, you may have a higher allowance than set out above.

If the only pension arrangement you are a member of is the ENW pension scheme, you only need to consider whether the total tax-free lump sum you want to take from the ENW pension scheme is more than your available LSA.

If you have previously taken pension benefits from either the ENW pension scheme or another scheme, it will be taken into account and will reduce the available LSA for future retirements.

Depending on the rules of the Scheme you may be able to take a lump sum in excess of the available LSA. This excess amount is called a Pension Commencement Excess Lump Sum (PCELS) and is liable for tax at your marginal rate. Alternatively, if the Scheme rules allow, the excess may be converted to additional annual pension.

The Lump Sum and Death Benefits Allowance (LSDBA) is the cap on the tax-free lump sum that can be paid to, or in respect of, a member of a registered pension scheme. If the value of lump sum death benefits means that the LSDBA will be exceeded, the excess may be taxed at the marginal rate of income tax of the person receiving it. 

The standard LSDBA is £1,073,100. If you have an LTA protection, you may have a higher allowance than set out above.

The Overseas Transfer Allowance (OTA) only applies to transfers out to a Qualifying Recognised Overseas Transfer Scheme. The OTA limit will be £1,073,100, unless a valid LTA protection is held. If the transfer value exceeds the OTA, there will be an overseas transfer charge (OTC) of 25%.