• The I Plan Cap is a limit set by the Trustee; it restricts how much you can contribute to your pension in any given year.
• The Annual Allowance is a limit set by HMRC; you will have to pay tax on contributions you make over the Annual Allowance.
• The Lifetime Allowance is a limit set by HMRC; you will have to pay tax when you draw your benefits if the total cash value of all your pension arrangements exceeds the Lifetime Allowance.

I Plan Cap

The I Plan Cap restricts the contributions to and the benefits paid from your pension. If your Pre You* salary is above the I Plan Cap, your I Plan Smart* contributions will be restricted by the Cap. Any ASCs/AVCs you pay will not be restricted to the Cap.

The limits are shown in the table below

Tax year	I Plan Cap
2021/2022	£172,800
2020/2021	£170,400
2019/2020	£166,200
2018/2019	£160,800
2017/2018	£154,200
2016/2017	£150,600
2015/2016	£149,400

The Annual Allowance

HMRC sets an annual limit on how much you can save into your pensions before you pay tax. You will have to pay tax on your excess contributions at your usual tax rate if you pay in more than the Annual Allowance.

To calculate whether you have exceeded the Annual Allowance in any tax year, you need to know the amount of your pension savings (also known as Pension Input Amount) and the Pension Input Period. The Pension Input Period is the same as the tax year so it runs 6 April to 5 April. The value of the growth in your DB pension needs to be included, along with the amount of any ASCs/AVCs you have paid within the Pension Input Period.

The Annual Allowance applies to ALL pension savings you make in the year, not just those into the I Plan. 

Tax year	Annual Allowance
2021/2022	£40,000
2020/2021	£40,000
2019/2020	£40,000
2018/2019	£40,000
2017/2018	£40,000
2016/2017	£40,000
2015/2016*	£80,000

 

From April 2016 onwards, the Annual Allowance will be tapered for 'adjusted incomes' over £150,000 by £1 for every £2. So, the Annual Allowance will range from £40,000 for 'adjusted incomes' of up to £150,000, to £10,000 at 'adjusted income' levels of £210,000 and above. This doesn’t apply to you if you have a 'threshold income' of £110,000 or lower. For definitions of the two different types of income please refer to the Annual Allowance Factsheet.

*The 2015/2016 tax year was split into two periods for Annual Allowance purposes – 6 April 2015 to 8 July 2015 and 9 July 2015 to 5 April 2016. The Annual Allowance for the first period was £80,000 and up to £40,000 could be carried forward to the second period, and this needed to be used before any carry forward from earlier periods.

If you exceed the Annual Allowance, you may be able to ‘carry forward’ unused allowance from the previous three tax years.

The Lifetime Allowance (LTA)

The Lifetime Allowance is the total cash value of all your pension arrangements.

You will have to pay tax on the excess if the value of your benefits when you draw them is more than the Lifetime Allowance. Any State Pension, State Pension Credit or any spouse’s, civil partner’s or dependant’s pension are not included in the Lifetime Allowance.

Tax year	Lifetime Allowance
2021/2022	£1.0731m
2020/2021	£1.0731m
2019/2020	£1.055m
2018/2019	£1.03m
2017/2018	£1m
2016/2017	£1m
2015/2016	£1.25m

 

You may be able to apply retrospectively for HMRC protection from reductions in the Lifetime Allowance. Find out more on the GOV.UK website.

Lifetime Allowance Factsheet

You should seek independent financial advice if you need help with tax and your pension savings. Find out more about choosing a financial adviser on the Money Advice Service website.