Consultations & legislation
Restriction of pensions tax relief
Close date: 27 August 2010
This page sets out the development of the changes to the pensions tax regime, which came into effect from 2011-12. It also contains links to relevant publications since the June Budget 2010 and contact details for questions.
Following an informal consultation on the alternative approach to restricting pensions tax relief, the Government announced on 14 October 2010 that, from 2011-12, the annual allowance (AA) for tax-privileged pension saving will be £50,000 and that, from 6 April 2012, the lifetime allowance (LTA) will be £1.5million.
The alternative approach was welcomed by employer and pension groups and the Government has worked in consultation with them to finalise the design of the new pensions tax regime. The Government is grateful to all those who provided views and participated in discussions.
The Government expects most individuals and employers to adapt their pension saving behaviour to avoid incurring a charge from exceeding the AA. Where pension contributions exceed the AA, unused allowance from up to the three previous years can be carried forward to offset against the excess contribution. This provides protection for the vast majority of people on moderate incomes.
However, recognising that in some circumstances individuals could still see high charges reflecting a significant uplift in pension value in a given year, the Government has provided a facility to enable individuals with an AA charge exceeding £2,000 to elect to meet this from their pension benefits in return for a reduction in those benefits, rather than out of current income.
The policy was legislated for in Finance Act 2011 which received Royal Assent on 19 July 2011. A number of supporting regulations were laid at the same time. The Government is grateful to all who engaged with us during the development of this policy.
Contact us
For any queries regarding the implementation of this policy, please contact the HMRC Pension Schemes Services Helpdesk on 0845 600 2622.
Previous exercise
- Information from the previous exercise on restricting pensions tax relief is archived on the HM Treasury website.
Related links
- Finance Bill 2011 supplementary document on restriction of pensions tax relief (PDF 218KB)
- Written ministerial statement: Pensions tax summary of responses document (PDF 68KB)
- Options to manage high annual allowance charges from pension benefits: a summary of the discussion document responses (PDF 316KB)
- Draft clauses on managing high annual allowance charges from pension benefits and updated Tax Information and Impact Note (HMRC website, opens in a new browser window)
- Options to meet high annual allowance charges from pension benefits: a discussion document (PDF 320KB)
- Written Ministerial Statement: Draft legislation on pensions tax relief (PDF 37KB)
- Written ministerial statement: Restricting pensions tax relief (PDF 260B)
- Restricting pensions tax relief through existing allowances: a summary of the discussion document responses (PDF 1MB)
- Government Actuary's Department report: Reducing the annual allowance (PDF 236KB)
- Draft legislation and explanatory note (HMRC website, opens in a new browser window)
- Draft guidance for individuals on the reduced annual allowance (HMRC website, opens in a new browser window)
- Restriction of pensions tax relief: a discussion document on the alternative approach (PDF 353KB)
- Defined contribution workshop slides (PPT 523KB)
- Defined benefit workshop slides (PPT 565KB)
- Delivery workshop slides (PPT 526KB)
- Presentation outlining the approach and timeline for engaging with interested parties (PDF 91KB)
The documents below are available in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website.
For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.
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