“Thank you for contacting me about the private pension contributions annual allowance.
My understanding is that, when it comes to private pension contributions, the reduced (or tapered) annual allowance for a tax year is dependent on net income, pension savings, threshold income, and adjusted income in that tax year. An adjusted income of over £260,000 would result in a reduced annual allowance in the same tax year.
However, it should not be reduced if your threshold income is £200,000 (increased from the previous £110,000) or less for that year. I understand that for a given year, each £2 in adjusted income over the £260,000 limit reduces the annual allowance by £1. The minimum reduced annual allowance was lowered from £10,000 to £4,000.
I have been reassured by my colleagues in the Treasury that they are aware of the calls to alter the allowance system. Any decision to modify our tax regime is a matter for the Treasury and careful consideration will be given to any proposed amendments to taxation. I understand that the Government keeps all taxes under review.
I shall be following the developments on this issue closely, and I will ensure my colleagues at the Treasury are aware of the strength of feeling on this issue.
Thank you again for taking the time to contact me.
Yours sincerely,
Sally-Ann Hart MP”