Pension tax allowances
Pension tax allowances are limits on how much you can pay into a pension over a year (Annual Allowance, and Money Purchase Annual Allowance) and build up in a pension over the course of your working life (Lifetime Allowance). Read the Tax summary factsheet for an overview.
The Annual Allowance is £40,000 for most people but it might be lower if you’re a high earner. If you take your pension benefits flexibly a Money Purchase Annual Allowance of £4,000 a year may apply. Read the Annual Allowance factsheet for more information.
The Lifetime Allowance is currently £1,073,100 and the Government plans to keep it at this level until at least April 2026. Read the Lifetime Allowance factsheet for more information.
If you go over these limits, you may have to pay a tax charge. These pension tax allowances are unlikely to affect the majority of our members.
We’ve produced several in-depth factsheets and worksheets that explain these limits in more detail, which can be found in the drop-down menus below. However, if you think you may be affected by these limits, you should consider getting independent financial advice.
It’s important to note that lump sum benefits which are paid from a pension scheme when an employee dies whilst still working for the Co-op are also tested against the Lifetime Allowance. Benefits which could be paid in this situation include:
• The value of your Pace DC account (including the contributions paid by the Co-op and any Additional Voluntary Contributions that you have paid)
• Your death in service lump sum. The amount of this will depend on your contribution rate at the time of your death but could be as high as 3 times your salary if you joined Pace DC before 10 June 2019
• If you were an active member of Pace DB on 28 October 2015 and switched immediately to Pace DC, you may qualify for an additional 3 x Salary life cover. Further information can be found in the Pace DB pensions guide
• Any other benefits which paid from other registered pension schemes outside of Co-op, i.e if you have transferred your Pace DB benefits to another pension scheme, the current value of this will also be included in your total
You are more likely to exceed the Lifetime Allowance on your death before retirement if your earnings are high and you have substantial pension savings.