Workplace Pensions 2020-21 Tax Year Update
With the start of the 2020-21 tax year, the following changes to workplace pensions’ thresholds and allowances are kicking in.
This change only applies to schemes where contributions are calculated on a Qualifying Earnings basis.
From the 6th of April 2020, the lower level of the Qualifying earnings band will increase from £6,136 to £6,240. The upper level will remain capped at £50,000.
This means that contributions will be calculated on the worker’s gross annual earnings that fall between £6,240 and £50,000, known as “qualifying earnings”. For example, if a worker earns £20,000 their qualifying earnings will be £13,760.
There will be no changes to the minimum contribution levels.
For the 2020-21 tax year, the Lifetime Allowance will increase from £1.055 million to £1.073 million.
The Lifetime Allowance is the maximum amount that individuals can save into a pension while still enjoying the full tax benefits.
The two tapered annual allowance thresholds (threshold and adjusted) have each been raised by £90,000 for the 2020-21 tax year.
This means that the“threshold income” will increase from £110,000 to £200,000, so individuals with income below £200,000 will not be affected by the tapered annual allowance. The annual allowance will only begin to taper down for individuals who also have an “adjusted income” above £240,000 (previously £150,000).
The annual allowance for pension contributions will still be £40,000 for 2020-21.
The information available on this page is of a general nature and is not intended to provide specific advice to any individuals or entities. We work hard to ensure this information is accurate at the time of publishing, although there is no guarantee that such information is accurate at the time you read this. We recommend individuals and companies seek professional advice on their circumstances and matters.