The Annual Allowance (AA)

The Annual Allowance (AA) is the maximum amount by which your pension savings, including any AVCs, can increase in any year without incurring a tax charge.

The standard Annual Allowance is currently £40,000 a year.

A factor of 16 is used to work out the value of a final salary pension to compare against the AA, so this would be equivalent to a growth in pension (above the Consumer Price Index) of £2,500 p.a. or Additional Voluntary Contribution (AVC) payments of £40,000, or a combination of the two, up to the £40,000 limit. If you have any pension savings outside of the BA Schemes (for example, if you are making pension contributions to the British Airways Pension Plan (BAPP)), these must also be included in any AA assessment. You can offset pension savings that exceed the AA against any unused AA from the previous three years.

The Annual Allowance year is aligned with the tax year (6 April to 5 April) from April 2016, prior to this for the BA Schemes it ran from 1 April to 31 March.

For further information: https://www.gov.uk/tax-on-your-private-pension/annual-allowance

What types of pension build up count towards the AA?

Generally, all pensions that you build up within the BA Scheme must be included in any AA assessment. Any AVCs you save and savings to other UK-registered pension arrangements must also be included.

If you have crystallised your pension

If you crystallised your BA pension at or after your NRA, the late retirement uplifts that are added to your pension whilst it remains crystallised are only included in any AA assessment if you have saved AVCs during the Annual Allowance year.

 
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