I think I was told 29% was the maximum, but I can't verify that.
It varied with the type (and whether you had) a company scheme. For instance I was in a DB scheme at the time and the total limit was 15%, whatever your age, including contributions to the DB scheme. We had to contribute 5% to the DB scheme, so were only allowed to contribute 10% to an AVC/FSAVC.
For people without a company scheme contributing to a personal pension there was some variation with age AIRI.
The table below shows the salary at which a reduced Annual Allowance would be breached in the career average pension schemes of the main public service pension schemes.
Salary at which a reduced Annual Allowance would be breached
With an Annual Allowance of £20,000, huge numbers of public sector workers would routinely breach the Allowance. A Civil Servant earning £54,000 p/a would have a tax charge to pay. It might take a few years to exhaust carry-forward, but then there would be a tax charge every year, despite earning below the Child Benefit taper level.
The figures are a best-case scenario. The threshold salary values would routinely be lower than this if, for example:
The member has above-CPI in-service revaluation of past career-average service (NHS and Teachers' Scheme)
The member has final-salary linked past service which has increased by more than CPI
The member is making external pension contributions, eg, to a personal pension
The member is making extra pension contributions, eg, Added Pension, Added Years, AVCs
The member has external income and is subject to the tapered Annual Allowance.
They probably couldn't reduce the AA below about £30,000 if it applies to DB, but they could do what's been suggested a number of times and only apply the LTA to DB, and only apply the AA to DC.
For instance, the AA (for DC only) could be set at £20,000, the LTA could be redefined as a DB pension limit eg around £52,000pa which is about the current LTA.
People with both DC and DB would have their max DB pension reduced by perhaps 1/25th of their DC pension input. For transition perhaps the value of DC pot at a particular date eg start of this year plus DC pension input from then on.
So for example if someone currently has a £500k DC pot and puts in £20k pa for the next 5 years, £600k/25 = £24k is deducted from their "DB pension limit" giving a £28k DB pension limit. If this is exceeded an LTA charge can be paid from their DC fund if they choose, or DB benefits reduced.
This will be more generous than the current LTA but the govt would almost certainly save a lot by the massive AA cut. And £20k pa would likely result in a similar pension to the max DB pension over a working life accounting for investment growth, so would be broadly fair. Would probably need to up the carry forwards years from 3 to 5 or 6.
If the government finds the 'cost' of pension tax breaks to be "eye-wateringly expensive", it is only because they have legislated eye-wateringly high levels of tax.
Although its a outgoing, its to repay back money which under the current rules they shouldn't have taxed you on. Thats not a cost its basically the same as a shop giving you your change back after you've bought something with a higher denomination.
Looking at the news tonight the DUP MPs might not even support the budget this time so Spreadsheet Phil might be under some pressure to keep it bland and inoffensive.
Replies
I think I was told 29% was the maximum, but I can't verify that.
For people without a company scheme contributing to a personal pension there was some variation with age AIRI.
Of course, a Government "ruling something out" holds about as much currency as a campaign or manifesto "promise", so there's that ...
For instance, the AA (for DC only) could be set at £20,000, the LTA could be redefined as a DB pension limit eg around £52,000pa which is about the current LTA.
People with both DC and DB would have their max DB pension reduced by perhaps 1/25th of their DC pension input. For transition perhaps the value of DC pot at a particular date eg start of this year plus DC pension input from then on.
So for example if someone currently has a £500k DC pot and puts in £20k pa for the next 5 years, £600k/25 = £24k is deducted from their "DB pension limit" giving a £28k DB pension limit. If this is exceeded an LTA charge can be paid from their DC fund if they choose, or DB benefits reduced.
This will be more generous than the current LTA but the govt would almost certainly save a lot by the massive AA cut. And £20k pa would likely result in a similar pension to the max DB pension over a working life accounting for investment growth, so would be broadly fair. Would probably need to up the carry forwards years from 3 to 5 or 6.
https://www.dailymail.co.uk/money/pensions/article-6268739/Treasury-admits-no-consensus-pension-tax-relief-overhaul.html
https://www.dailymail.co.uk/news/article-6270709/amp/Philip-Hammond-plots-raid-pension-pots-says-tax-breaks-eye-wateringly-expensive.html
Although its a outgoing, its to repay back money which under the current rules they shouldn't have taxed you on. Thats not a cost its basically the same as a shop giving you your change back after you've bought something with a higher denomination.
Issue for me is that all recent changes have disproportionately impacted dc savers where db get a softer ride
20x calc for life time allowance probably the starkest disparity