Your annual allowance

The annual allowance 

Pensions are a tax-efficient way of saving for your life after work. But there are limits to the amount of pension you can build up before you must pay extra tax. 

Your annual allowance is the most you can save in your pension pots in a tax year (6 April to 5 April) before you must pay tax.

If the value of your pension savings in a year (including pension savings outside the LGPS) is more than the annual allowance, the excess will be taxed.

It is your responsibility to pay the right amount of tax.

The annual allowance rate

The allowance rate has changed over the years. View the current and historical rates of Annual Allowance.

Exceeding the allowance - your responsibilities

We will notify you if your pension saving in the LGPS (plus the amount of any AVCs you have paid) exceed the standard annual allowance in a year.

We must inform you by no later than 6 October, which follows the end of the financial year.

Note that we are not obliged to inform you if you exceed the tapered annual allowance.

If you exceed the annual allowance in any year, you are responsible for reporting this to HMRC on your self-assessment tax return. 

It is your personal responsibility to follow HMRC timetables for:

• notifications
• elections
• payments

People most likely to be affected by the limit

You are most likely to be affected if one or more of the statements below apply to you.

• you were in the LGPS before 1 April 2014, and you receive a significant pay increase
• you transferred in final salary membership from another public service pension scheme, and you receive a significant pay increase
• you pay a high level of additional contributions
• you are a higher earner
• you transfer pension rights into the LGPS from another public service pension scheme, and your salary on joining the LGPS is higher than the salary you earned when you left the previous scheme
• you combine a previous final salary LGPS pension benefit with your current pension account, and your salary has increased significantly since leaving the previous scheme.
• you have accessed flexible benefits on or after 6 April 2015

How to slow down your pension build-up

You can slow down your pension build-up to avoid exceeding the annual allowance by joining the LGPS 50/50 section.

In the 50/50 section, you pay half your normal contributions and build up half your normal pension, but you retain full life cover and ill health cover. Find out more about paying less through the 50/50 section on the LGPS member website.

Before taking any action to reduce your tax liabilities, you should always seek independent financial advice from an FCA-registered adviser. Visit the Money Help website for help in choosing an independent financial adviser.

If you have paid into more than one pension

The annual allowance will include any pension you have paid into during the same tax year. You do not get a separate allowance for each pension you are paying into.

Unused annual allowance

You can 'carry forward' unused allowance from the three previous years. This means that even if you exceed the limit for one year, you may not have to pay the tax charge.  

Using pension benefits to pay a tax charge

In some circumstances, you can ask us to pay a tax charge on your behalf. 

You must contact us no later than 31 July in the year following the end of the year to which the annual allowance charge relates. To apply, complete the scheme pays election form. 

You must make your election before you leave or retire. 

Further information and guidance

View the tax guidance on the LGPS website.

Learn more about tax on your private pension contributions on the GOV.UK website.

For help with pension scheme queries, call or write to HMRC:

Pension Schemes Services
HM Revenue and Customs
BX9 1GH

Telephone: 0300 123 1079

The tax reference number for Oxfordshire County Council Local Government Pension Scheme Fund is PSTR 00328822RP.