Mötley Crüe - Use It Or Lose It

Mötley Crüe - Use It Or Lose It

Andrew Reynolds | 06 February 2020

Mötley Crüe - Use It Or Lose It

Unlike the Californian rock band, your 16/17 pension annual allowance won’t be making a comeback

The pension annual allowance – often a source of controversy, particularly for our medical friends - effectively sets the maximum pension contributions from all sources (including your employer) on which you may be able to claim income tax relief.  In recent times it has been the subject of much controversy because of the way the allowance is tapered from the ‘standard’ £40,000 to as little as £10,000 for those earning over £210,000.  Whilst the £210,000 figure is a large one indeed, these rules can potentially affect people earning over £110,000; and, for a change, the Treasury have decided to make the rules rather complex.

One reason why the taper rules have come to the fore is another aspect of the annual allowance which has received far less press coverage: the carry forward rules.  These allow you to mop up unused annual allowance from up to three tax years ago – i.e. from 2016/17 onwards during the 2019/20 tax year.  In theory this could mean that, before 6 April 2020, tax-relievable pension contributions of up to £160,000 could be made (£40,000 a year for 2016/17 – 2019/20 inclusive).  This can be fantastically useful for those in the fortunate position of being able to save so much – company directors are one example.

As you might expect, there is some complex legislation setting out how carry forward operates. For example:

  • You must have been a member of a registered pension scheme in the tax year from which any unused annual allowance is carried forward. However, you (or your employer) do not have to have paid any contributions or accrued any benefit during those years, nor do any carried forward contributions have to be made to that scheme.
  • You must have covered an effective ‘entry fee’ of contributions equalling your annual allowance for the current year, i.e. £40,000, if you are not caught by the taper regime.
  • The carry back goes to the oldest tax year first and then works forward.
  • All tax relief is given in the current tax year, not the year to which the unused allowance relates.
  • Carry forward is not available if, at any time, you have taken advantage of the 2015 pension flexibilities to draw from any pension arrangement.

Calculating how much can be carried forward is sometimes a difficult exercise, requiring detailed contribution records, so if you want to beat the deadline for using up your remaining allowance from 2016/17, seek advice now.  French Duncan’s financial planners work collaboratively with our specialist tax colleagues to ensure all your affairs are handled under one roof.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.


If you would like more information or to discuss, please click here to contact

Andy Reynolds, FPFS Chartered Financial Planner



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