FYE, Pension - Carry Forward 3 years

The annual allowance that can be contributed to apension falls from £255,000 for most people to £50,000 in the new tax year starting 6 April 2011.

However there is a welcome return for 'carry forward' legislation.




This is where a person can carry forward unused relief from the previous 3 years

And even better news, this is being introduced retrospectively, so large payments are possible from 6 April 2011.

This could be ideal for high earners (normally considered around the £130,000-£150,000+ mark, see previous 3 blog posts) whose payments were restricted to £20,000 in each of the last two years (2010/11 & 2009/10)

Case study:
Dorothy Perkins paid £35,000 into her pension in 2008/09
Her payment for the next two years was restricted to £20,000 in each year (although if she'd been allowed, Dorothy would have contributed the £35,000 she wanted to)
So on 6 April 2011, Dorothy could pay:
£50,000 + the unused relief from the previous 3 years
= £15,000 from 2008/09 + £30,000 from 2009/10 + £30,000 from 2010/11
= a total of £75,000 carry forward

So Dorothy (and her employer) could contribute a total of £125,000 for the 'pension input period' (see previous blog posts for Jargon buster on pension inputs) ending in 2011/12