Pension contributions

The new tax year brings new annual allowances for pension contributions. Some changes announced in the Budget may also require the review of client pension contributions - for instance, the annual allowance has been increased to £60,000 from £40,000 while the money purchase annual allowance has been raised to £10,000 from £4,000. Clients may be affected by the tapering rules while others may face a tax charge on contributions made in 2022/23.

Skip to section
 

• Review level of contributions for clients affected by the tapered annual allowance
• Identify clients who can use pension carry forward allowances in 2023/24
• Identify clients who can benefit from the de minimis pension allowance
• Identify clients approaching age 75 who are still contributing to a pension
• Identify clients who exceeded their 2022/23 annual allowance
• Identify clients with Enhanced or Fixed Protection wishing to start pension contributions
• More about your clients' Annual Benefit Statements
• Download your Pension contributions checklist

The amount of “tax privileged” contributions a client can make to a pension each year is limited to the annual allowance. For most people this is usually £60,000 for the 2023/24 tax year. However, for some high earners this may be reduced with the allowance being ‘tapered’ according to income, although everyone will retain an allowance of at least £10,000 (up from £4,000 for the 2022/23 tax year).

Clients affected by tapering may be able to contribute more to their pension if their “adjusted income” is expected to be lower this tax year (and vice versa). The adjusted income limit for this tax year has been raised to £260,000, an increase of £20,000 from 2022/23. Some clients may no longer be subject to the taper while others may be affected by it for the first time.

More information on the tapered annal allowance. 

A tax charge normally becomes due if a client’s pension contributions exceed the annual allowance. Pension carry forward, where available, allows them to make contributions in excess of the annual allowance without suffering a tax charge. 

You can use our Pension Summary report to help establish which clients may be able to benefit from carry forward in the 2023/24 tax year. It identifies how much a client has contributed to their pension over the three previous tax years.

All UK relevant individuals under age 75 have an annual pension allowance – even if they have no relevant earnings. They can pay £2,880 (net) into a pension and these contributions receive an immediate 25% uplift from the Government. This brings the total (gross) amount that can be invested to £3,600. Therefore, any clients who have no relevant earning can still make “tax privileged” contributions in the 2023/24 tax year.

Tax relief on personal contributions stops at age 75. So, any clients approaching this age who are still contributing to a pension may need to be informed that the tax benefits will shortly end. Our Pension Summary report shows both the contributions made in the tax year and the date a client reaches age 75 and so it’s easy to identify which clients may be affected by this issue.

Identify clients who exceeded their 2022/23 annual allowance and, if appropriate, submit Voluntary Scheme Pays requests

If a client exceeded their annual allowance for pension contributions in 2022/23, they may have to pay an annual allowance tax charge. It may be possible for the client to pay some or all of the charge from their pension account (Scheme Pays). Fidelity’s Pension offers Voluntary Scheme Payments but the request must be submitted to us by 31 August 2023.

Fortunately, our Pension Summary report shows how much a client contributed to their pension last year – this can help you identify which clients face a potential tax charge which could potentially be paid through our scheme.

More on the annual pension allowance charge and Scheme Pays requests

Clients who hold a valid enhanced protection or any valid fixed protections, will be able to accrue new pension benefits, join new arrangements or transfer without losing this protection provided this protection was applied for before 15 March 2023, and a certificate or reference number subsequently issued, from 6 April 2023. They will also keep their entitlement to a higher pension commencement lump sum and will be able to accrue new pension benefits, join new arrangements or transfer without losing this protection” (cribbed directly from HMRC newsletter)

Your clients’ Pension Annual Benefit Statement are sent out at the beginning of May. The document provides a summary of how their pension has changed over the course of the year, along with a projection of what the pension might be worth when they reach their intended retirement age. 

Where can your client find their Pension Annual Benefit Statement

The Annual Benefit Statement can be found in your client's online documents, marked as a 'Statement & Valuation', indexed against their pension account number. If clients preference is printed copy then the statement will be posted.

Points to note:
 

• Any tax relief not received by the date on the Annual Benefit Statement, will not appear on your clients statement for this year (2022/2023).
• Any pending tax relief will be included in your clients statement next year (2023/2024).
• Any contribution received after the 4th of April 2023 will not be shown on your clients statement. A letter will be sent to your client confirming this and it will be shown on next years ABS.
• The ABS should not be used for your client tax return purposes.

For more information, please visit Help & support.

Important information - The value of investments and the income from them, can go down as well as up, so clients may get back less than they invest. The value of benefits depends on individual circumstances. The minimum age clients can normally access their pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless they have a lower protected pension age. Different options may have different effects for tax purposes, different implications for pension provision and different impacts on other assets and financial planning.