Pensions and tax

This section has more information about the current tax allowances that apply to pensions and retirement savings in the UK.

Please be aware this is only a high-level summary of complicated arrangements. Pension tax allowances are a personal tax issue, and it is your responsibility to establish whether you have exceeded them and - if so - to arrange payment of any tax that is due. As the cost of going over tax allowances can be significant, you should consider taking independent financial advice if you think you may be affected. Visit Getting financial advice for details of organisations that can help you with finding financial advice.

Remember

Tax treatment depends on your personal circumstances and these, and the tax rules, could change in the future.

The annual allowance

Pension contributions are normally paid before tax is taken off, so they receive tax relief as long as they stay within the annual allowance. The annual allowance is the total amount you can save (or can be saved on your behalf) towards your retirement in a tax year and still get tax relief.

What the annual allowance includes

You need to take into account all the pension arrangements you are a member of.

If you are currently working for Credit Suisse and building up DC Plus benefits, the annual allowance includes Credit Suisse’s contributions and any contributions you make.
If you also have DB benefits and you are still an active member, it includes increases to the value of your DB benefits as a result of the salary or inflation link, valued using a method set by HMRC.
If you are building up benefits in another employer’s pension scheme, it includes contributions from you and your employer.
It also includes any contributions you are making to a personal pension.

The annual allowance is currently £60,000 a year for most people. You might have a lower annual allowance if:

you have a high income; or
you have used benefits from a DC pension scheme flexibly to provide a taxable income (for example by taking a drawdown income or cash), and have become subject to the money purchase annual allowance (see below).

For more information about the annual allowance, please visit the Government website: www.gov.uk/tax-on-your-private-pension/annual-allowance.

There is also helpful information on the Fidelity website: retirement.fidelity.co.uk/resources-guidance/guides-and-factsheets/

Carrying forward your annual allowance

You can carry forward any annual allowance you have not used up in the previous three tax years, and add it to your annual allowance for the current tax year (up to the total amount of your earnings for the year). This could give you more scope for building up benefits in the current year. The exception to this is the money purchase annual allowance (see below).

The money purchase annual allowance

If you have benefits in a DC pension scheme (where the benefits build up from contributions and investment returns) and access these flexibly to provide a taxable income (for example by taking a drawdown income or taxable cash), your annual allowance will reduce to £10,000 a year. This is known as the “money purchase” annual allowance. You will not be able to carry any annual allowance over from previous years.

For more information about the money purchase annual allowance, please visit the Government website: www.gov.uk/tax-on-your-private-pension/annual-allowance.

There is also helpful information on the Fidelity website: retirement.fidelity.co.uk/resources-guidance/guides-and-factsheets/

The tapered annual allowance

The annual allowance is reduced for individuals with income in a tax year over £260,000, including pension contributions, known as Adjusted Income. For every £2 of Adjusted Income over £260,000, your annual allowance will reduce by £1 (referred to as the “tapered annual allowance”). The minimum tapered annual allowance is £10,000. Therefore, anyone with Adjusted Income of or above £360,000 will have a tapered annual allowance of £10,000.

If you have unused annual allowances from earlier years, these can be carried forward for up to three years and added to your tapered annual allowance.

For more information about the money purchase annual allowance, please visit the Government website: www.gov.uk/tax-on-your-private-pension/annual-allowance.

There is also helpful information on the Fidelity website: retirement.fidelity.co.uk/resources-guidance/guides-and-factsheets/

Managing pension contributions against the annual allowance

If you are working for Credit Suisse, you can reduce Credit Suisse’s contributions to the Fund – currently by up to 6% (or more if you are a Credit Suisse Master Trust member). Visit Bubble for more information. Go to Do it online.

If you are building up benefits in another employer’s pension scheme, check whether they have a facility to help you keep contributions within the annual allowance.

If you go over the annual allowance

If you go over the annual allowance in a tax year, after taking into account any unused allowances from previous years (see "Carrying forward your annual allowance" above), you would pay tax at your highest rate on the excess. If you find you have gone over the annual allowance, you will need to declare this on your self-assessment tax return.

Ordinarily the tax is payable through self-assessment, but in some circumstances, you may ask the Fund to pay the tax charge – known as "Scheme pays". The tax charge would be deducted from your benefits. If you want more details, including the deadlines that apply, please contact Fidelity. Visit the Help and contacts page for Fidelity's contact details.

For more information about the annual allowance, please visit the Government website: www.gov.uk/tax-on-your-private-pension/annual-allowance.

There is also helpful information on the Fidelity website: https://retirement.fidelity.co.uk/resources-guidance/guides-and-factsheets/

Are there any other limits?

Since 6 April 2006, the lifetime allowance has been the total amount of UK pension savings (apart from your State Pension) that you could build up while still getting the full tax benefits.

From 6 April 2024, the lifetime allowance is replaced by three allowances. However, HMRC published a newsletter on 4th April 2024 advising that further legislative changes are needed regarding the abolition of the lifetime allowance and as a result members may need to wait until the regulations are in place before taking or transferring certain benefits.

This is to ensure that their available allowances and tax position do not need to be revisited later in the year.

New allowances in detail . . .

To view each of these new allowances in more detail, select each of these allowances in turn, from the list below.

The lump sum allowance (LSA)

The lump sum allowance (LSA) is a cap on the amount of tax-free cash you can take from your pension savings. The entitlement to tax-free cash is not changing - it's still capped at 25% of £1,073,100 (£268,275) or higher if you have a protected lifetime allowance.

The lump sum and death benefit allowance (LSDBA)

The lump sum and death benefit allowance (LSDBA) limits the value of the pension savings you can leave your beneficiaries tax free, if you die before the age of 75.

The standard LSDBA is £1,073,100. Some people might have a higher allowance if they also had a higher protected lifetime allowance, or tax-free cash protections. If you take any tax-free cash from your pension while you are alive (including a serious ill health lump sum) then your LSDBA allowance will be reduced by the same amount. If the pension savings you leave are more than your LSDBA and your beneficiaries receive it as a lump sum, your beneficiaries will have to pay tax on the extra amount, at their marginal rate of income tax.

If you die before the age of 75, your pension can generally be paid out as a tax-free lump sum to your beneficiaries subject to the lump sum and death benefit allowance). If your beneficiaries take your pension as drawdown or as an annuity, then the LSDBA does not apply and payments will be tax-free if paid within 2 years of notification of death.

After 2 years of notification of death or if you die after age 75, your beneficiaries have the same options, but they will have to pay income tax on the benefits and the LSDBA will not apply.

The overseas transfer allowance (OTA)

The overseas transfer allowance is a limit on the value of the pension savings you can transfer abroad without having to pay a tax charge.

The overseas transfer allowance is the maximum value of pension savings you can transfer overseas tax-free (to a qualifying recognised overseas pension scheme, or QROPS) - if you go above this, you will be charged 25% tax on the excess. The standard allowance is £1,073,100, although some people may have a higher one.

If you have already taken any of your pension before 6 April 2024, your overseas transfer allowance will be reduced by the amount of your lifetime allowance already used up.

Previously, the charge applied to only some overseas transfers. From 6 April 2024, it applies to all of them where the allowance is exceeded.

Please note:

One or more of these allowances will apply where tax-free payments are taken from your pension or you transfer your pension to an overseas scheme.

It is important to remember that the tax treatment of your pension depends on your personal circumstances and these, and the tax rules, could change in the future.

Need more information?

There is also helpful information on the Fidelity website: https://retirement.fidelity.co.uk/lifetime-allowance-changes/

You may also want to consider taking independent financial advice. Visit 'Getting financial advice' for details of the various organisations that can help you with finding financial advice.

Pensions and tax

Remember

The annual allowance

What the annual allowance includes

Carrying forward your annual allowance

The money purchase annual allowance

The tapered annual allowance

Managing pension contributions against the annual allowance

If you go over the annual allowance

Are there any other limits?

New allowances in detail . . .

The lump sum allowance (LSA)

The lump sum and death benefit allowance (LSDBA)

The overseas transfer allowance (OTA)

Please note:

Need more information?

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