HMRC’s personal pension and stakeholder statistics, published in March 2022, reveal that the number of individuals breaching the annual and lifetime allowances reached a new high in the 2019/20 tax year.
Annual allowance
As the table below shows, the number of individuals breaching the annual allowance rose by more than 675% in five years. The total value of pension contributions exceeding the annual allowance (reported through self-assessment) increased by 564% over the same period.
Tax year
Number of individuals reporting pension contributions in excess of their annual allowance through self-assessment
Total value of pension contributions exceeding the annual allowance reported through self-assessment
2015-2016
5,460
£143M
2016-2017
18,710
£584M
2017-2018
29,920
£912M
2018-2019
34,260
£819M
2019-2020
42,350
£949M
The system for limiting tax relief on pension savings has become more complicated in recent years with the introduction of the money purchase annual allowance for those who have flexibly accessed their DC benefits, and a tapered annual allowance for high income individuals. This complexity means many individuals may be unintentionally caught by the annual allowance.
Lifetime allowance
The lifetime allowance charges reported also reached new records, with 8,510 reports through accounting for tax returns in 2019/20. This represents an increase of 138% on the figure for 2015/16.
Number of all Lifetime Allowance charges reported by the scheme through Accounting for Tax returns
Total value of all Lifetime Allowance charges reported by the scheme through Accounting for Tax returns
3,570
£159M
5,000
£202M
7,040
£269M
7,130
£283M
8,510
£342M
The amount of lifetime allowance charges is likely to increase further in future reports due to the allowance being frozen until April 2026.
The above figures highlight the importance of making sure pension scheme members are aware of the different allowances that apply to pension savings. PS Aspire produces a series of briefing notes to provide members with information on the allowances, which can be requested from your PS Aspire consultant.