Long service and implications on annual allowance

Published by Bhargaw Buddhdev, Lisa Lawson on

We were asked to advise a leading University in relation to its senior staff.

Particular issues arose with one senior staff member with long service.  His pay history meant that the pension accrual had exceeded the annual allowance (AA) (£50,000) in each of the last 3 tax years.  He therefore had no unused allowances to be carried forward.  He had also been paying AVCs. We identified that his pension accrual would be in excess of the AA (£50,000).  We pointed out the tax consequences of continuing to pay AVCs and showed the University the advantage of reducing the pensionable salary for the senior employee.

Benefit

This advice reduced his AA and used the University's pension savings to provide a non-pensionable salary supplement to the senior employee.