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Yesterday, HM Revenue & Customs published updated guidance on the Annual Allowance for pension contributions.

The guidance will be most welcome for financial advisers and others, who have been concerned about the changes and how they will be implemented.

The changes orient around the significant reduction in the Annual Allowance - basically how much can be paid into a person's scheme in a year - from £255,000 to £50,000. Even the reduced amount seems like a lot of money; but because of the way that the 'value' of annual contributions may be calculated in various circumstances - such as with defined benefit schemes - that figure is much easier to reach than one might think.

In fact the reduced Annual Allowance will potentially affect many people with relatively modest earnings and pension schemes.

A couple of basic points to look out for are:

The 'year' in question is not necessarily the tax year or the calendar year but based on the Pensions Input Period;
It may be possible to utilise unused Allowance brought forwards from the previous 3 years.

For further information, see Annual Allowance Guidance