Pensions allowances

Annual allowance

The annual allowance is the maximum amount by which the value of an individual's pension savings across all the registered pension schemes of which they are a member may increase in any year without tax penalties arising. The annual allowance charge is levied where the annual allowance is exceeded. The amount of the annual allowance has changed over time and is set by order from the Treasury. It is also possible to carry forward unused annual allowance from the previous three tax years.

Unlike other types of allowances, considerations relating to the annual allowance are relevant at the point funds are paid into the registered pension scheme.

If the annual amount saved under the registered pension schemes by or on behalf of an individual exceeds the annual allowance, a tax charge known as the annual allowance charge will arise. An annual allowance charge may, in certain circumstances, be paid by the scheme through a system known as Scheme Pays.

For further information, see Practice Notes: The annual allowance and Using Scheme Pays to pay the annual allowance charge.

The lump sum allowance and lump sum and

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Minister for Pensions hosts roundtable on ‘Pound for Pound’ initiative in shift from cost to Value for Money

The Minister for Pensions, Torsten Bell MP, has hosted a roundtable with regulators and leading pension providers to support a joined-up approach to Value for Money (VFM) in pensions. The event marked the first public discussion of the ‘Pound for Pound’ (‘£4£’) initiative, aimed at shifting the UK market from cost-based comparisons to broader value-based metrics, shifting market conversations away from cost towards value. This shift is essential for the success of the government’s proposed approach set out in the Pension Schemes Bill 2025. Insights from Australia’s superannuation system were central to the session, highlighting how clear benchmarking, transparency and regulatory oversight have transformed both member outcomes and the understanding of value in Australia. Intended to inform the impending regulatory consultation on VFM metrics, the superannuation system formed a key reference point as the discussion explored how lessons from Australia and insights from providers could shape regulatory thinking and support the development of the Pension Schemes Bill. Roundtable participants including the Department for Work and Pension, the Financial Conduct Authority, Pensions UK and a number of the Mansion House Accord signatories, agreed that now is the time for government, regulators and industry to collaborate in shaping and embedding a robust, fit-for-purpose VFM regime.

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