Tax and pensions 

Paying in members 

To encourage people to pay into a pension there are special rules on how contributions and some benefits are taxed. 

Most people will be able to save as much as they want with full tax relief as their pension savings will be significantly less than the allowances. 

There is an annual allowance that limits the amount your pension can increase by each year. This limit is set by Her Majesty's Revenue and Customs (HMRC) and can change each year. The limit for 2021/22 is £40,000, although there are special rules for those higher earners earning more than £200,000 per annum.  

There is also a lifetime allowance which limits the amount you can accumulate free of tax in all your pension arrangements when you come to take your benefits. The allowance for 2021/22 is £1.073 million. 

Your pension Annual Allowance may be lower if you are affected by Tapering or have triggered the Money Purchase Annual Allowance (MPAA). 

As Lothian Pension Fund is a Defined Benefit Scheme, this is calculated based on the increase in your benefits each year instead of the amount you or your employer have paid in. 

You can find out more information regarding Annual Allowance on the Government website and by reading these factsheets which include information on both the Annual and Lifetime Allowances. 


  • Annual Allowance

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