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.

Not quite what you're looking for?

Search for your question

Try this long list of common questions

Cushon

Cushon Group Limited is registered in England and Wales with company number 10967805. Registered office: Stephenson House, 2 Cherry Orchard Road, Croydon, England, CR0 6BA. Cushon Money Limited is authorised and regulated by the Financial Conduct Authority with FRN 929465 and is registered in England and Wales with company number 11112120. Cushon Master Trust is regulated by The Pensions Regulator with PSR number 12008536. Cushon Group Limited is the sponsoring company of Cushon Master Trust and is registered in England and Wales with company number 10967805. We provide high quality impartial information but not advice, so it is important that you understand the risks of investing. The value of investments can go down as well as up which means you may get back less than you put in.