Pension contributions and the annual allowance.

The Annual Allowance was reduced to £50,000 on 6 April 2011 and the previous restrictions for high earners with total income of £130,000 or more ended.

Contributions are tested against the Annual Allowance of the tax year in which the Pension Input Period ends.  So, some contributions paid before 6 April 2011, may already be tested against the £50,000 limit, if the Pension Input Period during which they were paid ends in the 2011/2012 tax year.

Carry-forward provisions have been introduced so that any unused Annual Allowance from the previous three years can automatically be offset against contributions in excess of the Annual Allowance.  For the tax years 2008/09, 2009/10 and 2010/11, the Annual Allowance is assumed to be £50,000.  To benefit from the carry forward rules an individual must have been an active member of a registered pension scheme during that same tax year.