There are limits on how much you can pay into the Plan without incurring a tax charge. Most people will not be affected by these limits but you should be aware of them.
The maximum amount of tax-privileged savings that you can build up in registered pension schemes (such as workplace pension schemes and personal pensions) is set by the Government. There are two limits and they are known as the annual allowance and the lifetime allowance.
The annual allowance
The annual allowance relates to the total amount of tax privileged benefits it is possible for an individual to build up in one or more registered pension schemes in a single tax year. Contributions paid or benefits built up in excess of this amount will give rise to a tax charge on the pension scheme member.
The annual allowance is measured against all contributions paid into your retirement savings by you and your employer, including any AVCs, or to other arrangements such as a Personal Pension or Stakeholder Pension. It may be possible to carry forward unused annual allowance from earlier years.
The annual allowance reduced to £40,000 in 2014/15 and, from April 2016, a tapered reduction applies to the annual allowance for employees with taxable earnings plus retirement savings during the year of £150,000 or more (for every £2 that adjusted income exceeds £150,000 the annual allowance is reduced by £1 down to a minimum level of £10,000 for employees with an adjusted income of £210,000 or more).
The 2015/16 tax year was split into two tax years for annual allowance purposes under transitional arrangements announced in the Summer 2015 Budget statement. As a result of this, the annual allowance for 2015/16 could be slightly more than £40,000 in practice for some ERSP members. Visit our March 2016 news item and guidance for more information about the annual allowance or visit the HMRC website for full details.
The lifetime allowance
The lifetime allowance limits the total amount of tax-privileged benefits you can build up in registered pension schemes throughout your entire working lifetime.
The lifetime allowance for the 2019/20 tax year is £1.055 million. Visit the HMRC website for more details.
If the value of your total pension savings from all registered pension schemes in which you have participated (excluding the State Pension) exceeds this amount when you retire, your fund may be subject to a tax charge on the excess.
What if I need financial advice?
Understanding pensions can sometimes be difficult so you might have questions about your benefits or investments. The Experian Pensions team at Capita will help you with any questions you have where they can but they are not allowed to give you financial advice.
If you need further guidance the government has launched Pension Wise, which is a free and impartial service, to help individuals aged 50 and over understand the benefit options available at retirement. You can get guidance on your options or, if you prefer to speak to someone, you will be able to talk to an impartial guidance specialist on the phone or face-to-face. They'll talk about the steps you can take to turn your retirement savings into income for your retirement. Visit www.pensionwise.gov.uk or call 0300 330 1001 for further details.
Members who require financial advice based on the details of their individual financial circumstances instead of general guidance, will need to speak to an independent financial adviser (IFA), who is likely to charge for their services. Visit www.unbiased.co.uk to find an IFA near you.
You should note that neither the Trustees, the Company nor the Experian Pensions team are able to provide you with financial advice.
If you want to check your estimated contributions for the year try using the retirement modeller by clicking here. If you are already a member of the Plan then you can use the online modeller for members by logging into your retirement savings through our secure website.