Annual Allowance

[Jung200]

Hi, I’m hoping someone has a better understanding of the annual allowance in regards to pensions than me. In the next tax year, if my only income is a pension of 49k, do I have any annual allowance and what will it be? Thanks

If you are of working age then it depends on what you are receiving payment wise, if it's technically long term sick pay then it's different to a pension. I'm guessing it is related to a specific work scheme because ill health pensions only exist in a few sectors, only the hr department can explain what your payment is classed as from an income point of view, eg military pensions can pay out but you still can have a different job and contribute to a different pension via that income

Pensionwise can only discuss DC pensions, not DB btw.

@Jung200 I agree, you need to get specialist pension advice - as you can see from all the different opinions on here!

Pensions can be complex and it can be an expensive mistake if you get it wrong. Paying for advice would be money well spent.

Good luck.

Pensions are not earnings for the purpose of pension contributions. You generally need earnings from employment to have qualifying earnings.

If you have no qualifying earnings you can only contribute £2660 a year (which will be grossed up).

Is this Local Government? (If not ignore the rest of this post!)

Assuming it is, what you’re suggesting probably won’t work. Firstly, your employer would have to agree to keep you employed until after 5th April, which obviously has implications for them so they may not agree. The reason you would have to stay employed is because tiered ill health benefits have to be paid directly from active status so you wouldn’t be able to leave employment now, become a deferred member and then still have the enhanced payment from a date in April.

And even if your employer did agree to delay your retirement date, all you’re doing is postponing the issue because then the pensions growth that is causing the issue (the ill health enhancement) will be deemed to have occurred in the 25/26 tax year so you would just exceed in that year instead.

It might still work, because you would have minimal other growth in the 25/26 tax year (whereas in this tax year you’ve got the growth April-Jan as well as the ill health enhancement) plus you might then have some carry forward from the current tax year to use against it, so you might end up owing a bit less, but it would be really tricky to work out (and may not be an option anyway if your employer won’t agree to a later termination date).

Also, do you think you could appeal the severe ill health decision? To be awarded tier 1 but not to be considered in severe ill health isn't impossible but it's very uncommon. Do you have, and agree with, reasons why it was the case for you?

As you say it has such big tax implications, I'd appeal in all cases.