Implications of Exceeding the Annual Allowance

marycanary

I'm a member of the Local Government Pension Scheme.

Last year I came within £2500 of exceeding the Annual Allowance.  I fear I may be on the way to exceeding it this year and, although I have some unused AA to carry forward, I would like to know the implications if this happens.  I hope to retire in March 2023 so I want to maximise the amount I put into AVCs this financial year.  As I understand it, I can't calculate an estimated Pension Input Amount for 22/23 until the September inflation rate is announced in October.  What are the tax implications of exceeding the AA?  Is there a punitive tax to pay? Are there any other considerations of which I should be aware?

Thank you in advance

NedS

If you exceed the AA, you will not be entitled to receive tax relief on those contributions over the AA. You will need to identify that you have exceeded the AA, and file a self assessment tax return for the year declaring the amount by which you have exceeded it, and pay any tax that may be due as a result.

michaels

You pay at your marginal rate. Not punitive except you are paying out of already taxed income unless you can achieve scheme pays. No idea how this might work for a db pension although I will almost certainly find out next year as I underestimated the September rpi.

marycanary

Thank you for the replies. I think I will suspend AVCs until I can calculate the PIA  in October. If there is any headroom I'll start again and if not at least I have limited the damage.