What is the maximum pension I can earn?

Scheme limits

The Scheme has limits on the contributions you can pay and the benefits you can receive. If you are an Old or New Benefits member you can pay contributions of up to 15% of your earnings into the Scheme and there is a general limit of 40 years' pensionable service, including AVCs.

Pension limits

Current tax law allows you to be a member of more than one pension scheme at the same time. There are, however, two allowances that limit the total value of pension benefits you can build without incurring additional liabilities for tax. These allowances do not affect many people.

The following is based on the Trustees' understanding of these allowances.

The Annual Allowance

This limits the contributions and/or benefits that you can build up each year without additional tax charges. If your benefits build up by more than your available Annual Allowance (including any carried forward from previous years) the excess is taxed at your marginal rate.

In certain circumstances there will be an option for you to elect that the Scheme pay annual allowance tax charge on your behalf with a deduction applied to you benefits. As well as paying Additional Voluntary Contributions to the Scheme up to certain limits, you can currently also pay into LifePlan, or a personal pension of your own choice, to further boost your pension savings. You will have to make your own arrangements if you want to pay into a personal pension. You will normally be able to pay up to 100% of your UK earnings towards your pension and receive tax relief at your marginal rate. However, your contributions and benefits will be tested against the Annual Allowance. The amount tested from April 2011 will be:

• the amount by which any defined benefit pensions (e.g. your Scheme pension) have increased in excess of CPI, multiplied by a factor of 16; and

• the value of any contributions you or your employer have paid to a defined contribution pension (e.g. AVC to the Scheme, or contributions to LifePlan or a personal pension).

Any contributions paid or benefits built up above the Annual Allowance will be taxed as income at your marginal rate and the charge will be determined through the annual self-assessment tax return process. The Scheme has nominated a pension input period (the period for assessing the Annual Allowance tax charge) as ending on 31 March each year for all arrangements under the Scheme, and so the reduced Annual Allowance of £50,000 applies to all savings under the Scheme from 1 April 2011, rather than 6 April 2011. A different pension input period may apply to LifePlan or a personal pension. You are ultimately responsible for keeping track of all your pension savings for each pension arrangement, and for comparing them against the Annual Allowance.

The Lifetime Allowance (LTA)

This is an overall limit on the value of pension benefits you can build up across all types of registered pension schemes without additional tax charges. It is £1.8 million for the 2011/2012 tax year, but will reduce to £1.5 million for the 2012/2013 and subsequent tax years.

When your pension comes into payment, its capital value (calculated by multiplying your initial annual pension by a factor of 20) plus any lump sum must be checked against your remaining LTA.

Each time you take benefits from a scheme your remaining LTA will be reduced. The value of benefits which exceed your remaining LTA will be subject to a one-off tax charge of 55% if taken as a lump sum, or 25% if taken as a pension since the pension is also subject to income tax. These one-off tax charges can be paid by the Scheme when your benefits are put into payment.

Under the provisions to reduce the LTA, individuals who do not have Primary Protection will only be able to retain a LTA of £1.8 million if they opt out fully of all future pension provision and apply to HMRC for Fixed Protection before 6 April 2012. If you think you might wish to apply for Fixed Protection, then you should consider seeking specialist pensions advice, as Fixed Protection may be lost at some point in future, even if you opt out of Old Benefits with a deferred pension before 6 April 2012.

Keeping track of your benefits

You are responsible for keeping track of your aggregate benefits from all pension arrangements and checking how they compare with the LTA. On taking your scheme benefits, you will be asked to confirm whether your pension benefits exceed the LTA.

You are ultimately responsible for keeping track of these benefits and checking how they compare with the LTA.

On taking your Scheme benefits, you will be asked about your previous benefits and asked to confirm whether or not your pension benefits exceed the LTA.

If you have lost touch with a previous pension plan and need help in making contact again, see details about the Pension Tracing Service.