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How does the tapered annual allowance work?

The tapered annual allowance applies to people who are classified as high earners and means that in some cases, the amount that can be paid into their pension could be as low as £4,000 a year, and if more is paid in they get taxed on the excess.

An employee's annual allowance is reduced by £1 for every £2 that they earn over £240,000. This means that a higher earning employee could have an annual allowance of anywhere between £40,000 and £4,000. They will have to pay tax on any pension contributions that exceed this.

But there’s a solution - pension redirect.

To find out more about how you could help your employees save more towards retirement, watch this quick video on our YouTube channel.

Cushon provides high-quality impartial information but not financial advice.