Tax and the LGPS

HM Revenue & Customs (HMRC) governs pensions savings. There are controls on the amount of contributions you can make whilst still receiving tax relief. There are two main allowances for pension savings - an annual allowance and a lifetime allowance.

Annual Allowance

The amount of your pension savings that benefits from tax relief is limited to an annual allowance, currently £40,000. This applies to pension savings in:

If you save more than this amount you may have to pay a tax charge on the excess.

If you're already taking a pension using 'flexible drawdown' the amount of your annual allowance will be reduced.

LGPS Annual Allowance factsheet.


Lifetime Allowance

The lifetime allowance applies to any pension savings you have in:

The lifetime allowance is currently £1 million. Most people won't have to pay the lifetime allowance charge.


Please note: In April 2016 the lifetime allowance was reduced to £1 million. HMRC have prepared a factsheet which you might find useful.

The lifetime allowance applies even if you're in a pension scheme that you don't make payments into - for example if you're in a workplace pension that only your employer makes payments into.


Further HMRC guidance on Annual and Lifetime Allowance can be accessed on the HMRC website.
LGPS Lifetime Allowance factsheet.