Max pension contribution - DB pension concern

choccielover

I’ve been diligently maximising my pension contributions over the last few years and by the end of next tax year will have fully used all my carry forward and be limited to £40k a year.

However, I remembered recently that I have a (small - circa £2500pa pension) DB pension. I knew I had it and consider it when I look at my overall pension planning but suddenly realised That growth in this pension “pot” (I know that’s not the right term) might take up some of my £40k allowance.
Its an ex employer pension so there are no contributions being made if that makes a difference...

I’ll try googling but not sure what I’m really asking so hoped you good folks could either reassure me or point me in the right direction.

Many thanks for any help you can offer

kinger101

You can work it out the lifetime allowance here

https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance

Growth does not count toward annual contributions.

AlanP_2

Is it an active or deferred DB scheme?

Annual Allowance focuses on the input side so if nothing going in, because it is deferred, the no effect on AA.

If it's active then the nominal contribution value needs to be included in AA calculation.

Paul_Herring

That growth in this pension “pot” (I know that’s not the right term) might take up some of my £40k allowance.

Its an ex employer pension so there are no contributions being made if that makes a difference...

For what you're looking at, I'm fairly certain you may ignore it. The £40K limit only applies to contributions, and growth over time aren't contributions in any realistic meaning of the term.

(It may become a consideration, however, if you get near the lifetime allowance of ~£1M.)

m_c_s

Does this mean that those who were moved to Alpha pension in 2015 but who used to be in the old Classic DB pension that is now effectively banked but still linked to final salary do not count the Classic increase as part of the annual allowance?

Paul_Herring

Would the increases still happen if you weren't employed by them?

m_c_s

Paul_Herring wrote: »

Would the increases still happen if you weren't employed by them?

Yes by CPI and not by annual salary increase as is does currently.

Paul_Herring

No idea then.

I'd imagine, however, that the difference in increase, at least, between the two cases (still employed there/no longer employed there) would have some bearing on the matter somehow, though...

This is taxation-related stuff we're talking about, after all.

Malthusian

kinger101 wrote: »

Growth does not count toward annual contributions.

Not quite correct. Accrual of benefits in excess of inflation (measured in a specific way) counts towards the annual allowance.

As the OP isn't an active member, it is likely that she will be getting only statutory inflation-linked increases which won't result in an accrual. It is however in theory possible for her to have accrual to count against the annual allowance if, for example, the DB scheme applies a higher rate of revaluation than inflation for deferred members. Or if they applied a discretionary increase.

To be safe the OP should ask the scheme how much accrual there has been for Annual Allowance purposes for all the tax years in which she has been maxing out her allowance. Hopefully the answer will be "nil".

choccielover

Many thanks for all your comments

I will contact the scheme and ask about the accruals - its the old British Steel scheme (which i transferred to the new scheme)