Olive is a member of her employer’s GPP scheme, and she and her employer pay 5% each into the scheme. The TAA has applied to her since 2023/24 when she got a promotion.
For 2023/24, her salary was £260,000 so the total pension contribution was £26,000. Her only other income for that tax year was £1,000 in interest from her bank accounts. This means her adjusted income was £274,000 (£260,000 salary + £1,000 interest + £13,000 employer contribution). Her threshold income was £248,000 (£260,000 salary + £1,000 interest - £13,000 personal contribution). An adjusted income of £274,000 means her annual allowance was tapered to £53,000.
She wants to know how the TAA will affect her and whether she’ll be able to carry forward any unused annual allowance from previous tax years to allow contributions of 10% to continue, without incurring an annual allowance charge.
For 2024/25, the tapered annual allowance applies to individuals with an adjusted income of over £260,000. Olive’s salary will be £280,000 which would make the prospective total pension contribution £28,000. She estimates her bank interest will be £1,400 for 2024/25 which will make her adjusted income £295,400 (£280,000 salary + £1,400 interest + £14,000 employer contribution). Her threshold income will be £267,400 (£280,000 salary + £1,400 interest - £14,000 personal contribution). An adjusted income of £295,400 means her annual allowance will be tapered to £42,300.
Olive’s annual allowance in 2024/25 will be £126,800 (£42,300 tapered annual allowance + £84,500 carried forward). This is more than enough to cover the £28,000 contribution.