Members of staff who join one of Imperial’s pension schemes benefit from part of their contribution which would normally automatically go to the Government in tax going into their pension instead.  There is no restriction on the amount that can go into individuals’ pensions, but there are annual and historical lifetime limits on how much tax relief individuals receive on their pension contributions.

Tax relief on your annual pension contributions

Members of staff who are UK taxpayers in the tax year 2023-24 will receive tax relief on pension contributions of up to 100% of their earnings or a £60,000 annual allowance (AA), whichever is lower.

    • For example, if you earn £20,000 but put £25,000 into your pension pot (perhaps by topping up earnings with some savings), you will only get tax relief on £20,000.
    • Similarly, if you earn £80,000 and want to put that amount in your pension scheme in a single year, tax rules mean you will normally only get tax relief on £60,000. Any contributions you make over £60,000 will be subject to Income Tax at the highest rate you pay, unless you have carry forward unused allowances from the previous three years, and were a member of a pension scheme during those years.

There are exceptions to the above rule and further information can be obtained initially from Pensions.  Alternatively, consult with a regulated financial adviser for advice on how to proceed.

The Tapered Annual Allowance (TAA)

HMRC introduced a lower annual allowance for individuals with higher incomes, which applied from the tax year 2016-17 onwards. HMRC describes this as ‘tapering’. Tapering will only apply if you have both a ‘threshold income’ over £200,000 and an ‘adjusted income’ of over £260,000 from 6 April 2023 onwards.

The effect of the taper is to reduce your AA (and therefore increase your tax if you accrue benefits/make contributions above the rate of your reduced AA) as your salary increases. The AA is reduced by £1 for every £2 of adjusted income above £260,000, down to a minimum AA of £10,000.

The USS annual allowance modeller will help you identify if you will be required to pay additional tax at your highest rate.

USS AA Factsheet [pdf]

NHS AA Fact Sheet [PDF]
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Lifetime allowance for Pension savings

The lifetime allowance (LTA) is a limit on the value of money individuals receive from their pension schemes – whether lump sums or retirement income – that can be made without triggering an extra tax charge.

How much is the Lifetime Allowance?

The LTA was introduced in 2006 and the limit has been changed many times since this date.  Individuals who save over the LTA are liable to pay an additional tax charge when they draw from their pension.

From April 2023 any tax charges for savers who have exceeded the LTA will no longer apply, and, from April 2024 the LTA will be abolished altogether.