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.

You can pay as much as you like into a pension scheme. You could put all of
your earnings into your pension and it would be tax free. If you put in more than
you earn then you could have to pay tax on your contributions. 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 2014/15 is £40,000.

The Annual Allowance can sometimes be inadvertently exceeded if you receive an extraordinarily high pay increase (for example by promotion), bonus payments or by combining LGPS membership.

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 2014/15 is £1.25 million. 

You can get more information about tax allowances for both the annual and
lifetime allowance from HMRC.


You may still have to pay tax on your income when you start to take your

We deduct this via Pay As You Earn (PAYE).

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