The three main savings limits you should be aware of are:

1. The annual allowance (AA)

This is the amount you can add to your pension benefits each year without incurring a tax charge. For the 2019/20 tax year, most people will have an AA of £40,000. 

If you are a high earner (e.g. if your income excluding pension costs is over around £110,000 per year), you may have a lower, tapered AA. You can check if this applies to you at www.tax.service.gov.uk/pension-annual-allowance-calculator 

You can also carry forward any unused AA for up to three years. This allows you to have pension savings in excess of the AA in a certain year and pay no tax. The AA for the current tax year must be used before any previous years’ AA is carried forward.

Annual allowance for defined benefit (DB) schemes

There is a more complex calculation required to determine how much AA you’ve used if you are in a DB scheme. It's often referred to as the ‘pension input amount’ and is the difference between your ‘opening value’ and ‘closing value’ of your pension over a set time period (usually the tax year). The opening value is worked out as the value of your pension at the beginning of the year, multiplied by 16, plus any lump sum you're entitled to and any increases applied so that your pension keeps up with inflation.

2. The lifetime allowance (LTA)

This is the total amount of retirement savings you can build up over your working life without incurring an LTA charge. 

It includes the value of the benefits you build up in all registered pension schemes, and not just the benefits in the RS Group Pension Scheme. The State Pension does not count towards the LTA.

In the 2019/20 tax year, the standard LTA is £1.055 million. If your pension savings exceed the LTA, this could result in a tax charge of 55% on the excess (25% if you take the excess as income). Not many people are likely to be affected by this, but if you think you are, you can find out more on the HM Revenue and Customs website at www.hmrc.gov.uk. Alternatively, you may wish to consider taking advice from a professional financial adviser. 

3. The money purchase annual allowance (MPAA)

This applies to defined contribution (DC) savings only, including DC additional voluntary contributions. If you have started to access any DC retirement benefits flexibly elsewhere, such as through flexible drawdown and want to continue paying contributions to the Scheme, your AA will reduce to £4,000.