Annual Allowances (AA)

The Annual Allowance is the maximum amount of pension savings an individual can make each year with tax relief without incurring a tax charge, which aims to effectively recoup some of the tax relief given.

The Chancellor has now confirmed the annual tax-free pension allowance will rise from £40,000 to £60,000 from April 6, 2023.

Ms Till said: “The Budget estimated roughly 80 percent of NHS doctors would not receive a tax charge in respect of accruals as per the 2015 NHS career average scheme. The rules in relation to carrying forward unused annual allowances from the three previous tax years will remain the same.”

Money Purchase Allowance and Tapered Annual Allowance

In addition, the Money Purchase Annual Allowance (MPAA), a reduction to the AA for individuals who have flexibly accessed their money purchase pension savings, will rise from £4,000 to £10,000 from April 6, 2023.

This same increase also applies to the Tapered AA which is a reduction to the AA for individuals with income above set levels.

The adjusted income threshold for the tapered AA will also rise from £240,000 to £260,000 as of next month.

Gary Smith, financial planning partner at Evelyn Partners, commented: “The Money Purchase Annual Allowance – introduced to prevent wealthier savers recycling their tax-free lump sum into new pension arrangements – is back to where it was originally set at £10,000.