Finance Bill and response to consultation issued 31 March 2011

Changes to the draft legislation issued in December 2010 or guidance include:

Pension input periods (PIPs):

  • Schemes will be given more flexibility to align their PIPs with the tax year regardless of whether they have previously chosen a different PIP.
  • For new schemes and members, the default PIP will be the tax year when the scheme is first set up or a new member joins.  


  • It will be made clear that anti-avoidance provisions are not intended to catch cessation or reduction of future accrual in a PIP in order to not exceed the annual allowance.

Lifetime allowance

  • Individuals claiming "fixed protection" will be able to retain a lifetime allowance of £1.8m if they make no further tax-relieved savings after 5 April 2012. The maximum tax-free lump sum will be 25% of £1.8m.

"Scheme pays"

  • Regulation-making powers will be included to override scheme rules to allow schemes to pay a member's annual allowance charge where required under the scheme pays the provisions.

Discretionary/contingent accrual

  • The Government has confirmed that contingent or discretionary benefits will only be included in an individual's pension input amount (and therefore be counted for the purposes of the annual allowance) in the year in which the individual becomes unambiguously entitled to the benefits. (This may result in a single large increase in a member's pension input amount that may exceed the annual allowance).

Bridging pensions

  • Discretionary or contingent bridging pensions will count towards the member's annual allowance when the member becomes entitled to them. Only bridging pensions that accrue year on year may be included in the individual's pension input amount for each year.

Late retirement

  • Increases in pension because of a late retirement uplift will count towards the annual allowance unless the uplift is expressed as a percentage determined in accordance with scheme rules in place on 14 October 2010.