Annual allowance

This is the amount by which the value of your pension benefits may increase in any one year (disregarding any increase in value in the year that they become payable) without you having to pay a tax charge. Years run from 1 April to 31 March. 

The annual allowance for 2010/2011 is £255,000.

The assessment covers any pension benefits you may have in all tax-registered pension arrangements – not just the LGPS.

The annual allowance tax charge is payable at 40% on any increase in benefits above the annual allowance but will not apply if you have registered to have enhanced protection but only if you keep enhanced protection throughout the relevant tax year.