This is the period over which the amount of pension input is measured for the purposes of an annual allowance test. This did not always align to the tax year.

The date on which the pension input period (PIP)ended determined the tax year of assessment for the annual allowance or MPAA.

The budget announced that from 6 April 2016 all PIPs will run between 6 April and 5 April each year (i.e. in line with the tax year)

The total pension input is the amount of contribution (or accrual of benefit) that will be tested against the annual allowance.

For money purchase schemes

Any relievable pension contributions paid into the pension count towards the annual allowance. This includes member contributions, employer contributions and contributions by someone else on their behalf.

Any investment income or returns and any contributions once the individual is over 75 years old are NOT included.

For an active member of a DB scheme

1. The value of the member’s pension benefits at the beginning of the PIP is calculated. This is known as the opening pension input value. The opening pension input value is then multiplied by 16 and then increased by CPI using the figure from September before the start of the tax year. EG the 2018/19 calculation will use the figure from September 2017
2. The value of the member’s pension benefits at the end of the PIP is then calculated. This is known as the closing pension input value. This is also multiplied by 16.
3. The difference between the two figures is the total pension input, which is tested against the annual allowance

EG – At the beginning of the 2018/19 PIP, Lawrence, aged 48, had been a member of his defined benefit scheme for 15 years. The scheme had an accrual rate of 1/60th and his pensionable remuneration was £63,000.

At the end of the 2018/19 PIP Lawrence had been a member of the scheme for 16 years and his pensionable remuneration had increased to £66,000.

In the year to September 2017 the CPI increased by 3.0%. Lawrence’s total pension input is calculated as follows:

1.The value of Lawrence’s benefits at the beginning of the 2018/19 PIP was 15/60 × £63,000 = £15,750

– this is then increased using a factor of 16: £15,750 × 16 = £252,000; and

– then increased in line with the 0% increase in the CPI, i.e. £252,000 × 1.03 = £259,560.

2. The value of Lawrence’s benefits at the end of the 2018/19 PIP was 16/60 × £66,000 = £17,600

– this is then increased using a factor of 16: £17,600 × 16 = £281,600.

3. Lawrence’s total pension input is therefore £281,600 – £259,560 = £22,040.

In this case the total pension input of £22,040 is less than the annual allowance. Consequently, there will be no annual allowance tax charge for Lawrence.

Other exclusions from total pension input

As well as the exclusions relating to specific types of arrangement (e.g. investment growth in respect of a money purchase scheme) there are two other exclusions from total pension input. These are:

• contributions and defined benefit accrual in the tax year in which the member dies; and
• contributions and defined benefit accrual in the tax year in which benefits are taken due to the member’s severe ill-health (where expectation of life is less than twelve months).