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The annual allowance — the maximum amount that can be saved in registered pension schemes in a tax year with the benefit of tax relief — is a widely understood concept. Less well understood is the precise mechanism by which pension saving is measured against that allowance. The answer lies in two technical terms: the pension input period (PIP) and the pension input amount (PIA).
For most defined contribution (DC) pension savers, the measurement is relatively straightforward. For those with defined benefit pensions, however, the calculation is actuarial, non-intuitive, and capable of producing large pension input amounts in years when the member has not deliberately increased their contributions. Understanding how the measurement works is essential for avoiding an unexpected annual allowance charge.
The Pension Input Period
A pension input period (PIP) is the time window over which pension saving is measured. Since 6 April 2016, all PIPs are aligned to the UK tax year — running from 6 April to 5 April of the following year. This alignment was a deliberate simplification: before 2016, different schemes could have different PIPs (some running to their own financial year-end, others to the anniversary date of the scheme), making it very difficult for members to know their total pension input across multiple schemes in a tax year.
The transition to a 6 April–5 April PIP for all schemes was introduced by the Summer Budget 2015 and took effect immediately. The 2015 changes also introduced a complex set of transitional rules for the period from 9 July 2015 to 5 April 2016 — the "post-alignment tax year" — which created a notional mini-PIP with reduced annual allowance. These transitional provisions are now largely historical, but they can still be relevant when calculating carry forward from the 2015–16 tax year.
Pension Input Amounts for Defined Contribution Schemes
For defined contribution pensions — personal pensions, SIPPs, group personal pensions, master trusts, and DC occupational schemes — the pension input amount is the total gross contributions paid into the scheme during the PIP.
Gross contributions include:
- Employee contributions: the amounts you personally contribute, before or after tax relief depending on the contribution mechanism
- Employer contributions: what your employer pays into the scheme, including salary sacrifice contributions (which count as employer contributions for annual allowance purposes)
- Relief at source additions: the basic rate tax relief claimed by the scheme provider from HMRC and added to the contribution (this forms part of the gross contribution and counts toward the annual allowance)
What is not included: investment growth, dividend reinvestment, and interest credited to the fund. The annual allowance tests contributions, not investment returns. A pension fund that grows dramatically through investment does not trigger an annual allowance charge — only contributions do.
Example: You contribute £400 per month to a SIPP under relief at source. The provider claims 20% basic rate relief from HMRC, making each net contribution of £400 into a gross contribution of £500. Over a full tax year, your net contributions total £4,800; the provider adds £1,200 of tax relief; the gross pension input amount is £6,000. Your employer also contributes £3,000 per year to your workplace pension. Total pension input amount: £9,000. Well within the £60,000 annual allowance.
Pension Input Amounts for Defined Benefit Schemes
The calculation for DB schemes is fundamentally different — and much more complex. The pension input amount is not based on what is paid into the scheme, but on the increase in the value of the member's accrued benefits.
The formula is:
PIA = (Closing accrued pension × 16 + closing lump sum) − (Opening accrued pension × CPI uprating factor × 16 + opening lump sum × CPI uprating factor)
Where:
- Closing accrued pension = the annual pension the member would receive if they left the scheme (or retired) at the end of the PIP
- Opening accrued pension = the same, but at the beginning of the PIP
- CPI uprating factor = an inflationary uplift to the opening value, to ensure that the "real" (above-inflation) increase in the benefit is what generates a pension input amount, not merely inflationary maintenance of existing accruals
- ×16 = the standard conversion factor used to convert an annual pension amount into a capital value for annual allowance comparison purposes
The lump sum element applies to DB schemes where a separate lump sum (rather than, or in addition to, a pension) is accrued.
Why does ×16 matter? The factor of 16 reflects the government's view that for annual allowance purposes, a £1 per year increase in DB pension is worth £16 in capital terms (consistent with a 1-in-16 annuity pricing factor). This means that a DB scheme that grants a member an additional £3,750 per year of pension accrual generates a pension input amount of approximately £60,000 — the entire standard annual allowance — even if the member has not "contributed" anything in the conventional sense.
When DB Pension Input Amounts Can Spike
For DB scheme members, the pension input amount can be unexpectedly large in certain circumstances:
1. Large Salary Increase
Many DB schemes accrue pension as a fraction of salary (e.g. 1/60th of final salary per year of service). If salary increases by 20% in a year, the accrued pension for all prior years of service also notionally increases (in a final salary scheme), dramatically increasing the closing value relative to the opening value. The resulting pension input amount can far exceed the annual allowance.
2. Generous Accrual Rates
Public sector schemes (NHS, teachers, civil service, armed forces) typically accrue pension at 1/54th or 1/57th of career-average salary per year. For senior public servants on high salaries, this can generate pension input amounts well above the annual allowance even without any salary increase.
3. Periods of High Service Accrual
Some executives or long-serving employees receive "augmented" service or enhanced accrual as part of their remuneration package. This directly increases the closing pension value and produces a higher PIA.
4. High CPI in the Opening Value Uprating
The opening value is uprated by CPI to produce a "real" comparison. In a year of high CPI (as in 2022–23 when CPI exceeded 10%), the opening value uprating is large, which reduces the pension input amount. Conversely, in a year when CPI is low, the opening value uprating is smaller — which increases the pension input amount relative to normal.
This counter-intuitive effect means DB pension members can have higher annual allowance charges in low-inflation years, and lower charges in high-inflation years — purely as a result of the measurement methodology.
The Pension Savings Statement: Your Early Warning System
When a pension scheme calculates that a member's pension input amount exceeds the standard annual allowance (£60,000 in 2026–27), it is required by law to issue a Pension Savings Statement. The statement shows:
- The pension input amount for the current tax year
- The pension input amounts for each of the previous three tax years (which the member may be able to use for carry forward)
Receiving a Pension Savings Statement does not automatically mean you owe an annual allowance charge — it simply means your PIA in the scheme has exceeded the standard annual allowance. The relevant comparison is your total PIA across all schemes versus your personal annual allowance (which may be higher than the standard allowance if you have carry forward available, or lower if the tapered annual allowance applies).
However, receiving a statement should prompt you to:
- Total up your PIAs across all schemes in the same tax year
- Determine your personal annual allowance (including carry forward)
- Assess whether the total exceeds the personal annual allowance
- If so, calculate the annual allowance charge and report it on self-assessment
Schemes are required to issue statements within three months of the end of the tax year (i.e. by 6 October). You can also request a pension savings statement from your scheme at any time.
The Interaction with Carry Forward
Carry forward allows unused annual allowance from the previous three tax years to be added to the current year's allowance. For DB scheme members who have large PIAs in some years and smaller ones in others — for example, due to variable salary growth — carry forward can be particularly valuable.
To use carry forward, you must have been a member of a registered pension scheme in the years from which you are carrying forward (even if you made no contributions in those years). The unused allowance in those years (standard or tapered allowance, minus PIA) is available to carry forward.
Reporting and Payment
Annual allowance charges are assessed and paid through self-assessment. If your total PIAs across all schemes in a tax year exceed your annual allowance (including carry forward), the excess is taxed at your marginal income tax rate.
For DB scheme members who cannot easily pay a large annual allowance charge from liquid savings, the Scheme Pays mechanism is available. This allows the scheme to pay the charge on your behalf (directly to HMRC) in exchange for a reduction in your pension benefits. The reduction is calculated actuarially to reflect the charge paid. The Scheme Pays election must be made by 31 July of the year following the tax year in which the excess arose, and only applies where the charge is £2,000 or more and the excess is within the scheme concerned.
How Global Investments Can Help
For defined benefit scheme members — particularly those in high-accrual public sector schemes or senior executives in final salary arrangements — the annual allowance and pension input amount mechanics are a genuine planning challenge. Our advisers help clients:
- Obtain and interpret pension savings statements from DB schemes
- Calculate total PIAs across all scheme memberships in a tax year
- Assess carry forward availability from prior years
- Model the impact of potential salary increases or accrual enhancements on future PIAs
- Advise on whether Scheme Pays is appropriate, and the implications for pension benefits
For internationally mobile clients with both UK DB entitlements and overseas pension arrangements, the interaction of pension input amounts with non-resident and overseas income considerations adds further complexity. We advise clients internationally, through our global network of advisers.
The guidance in this article is general in nature. Annual allowance and pension input period rules are technical and subject to change. This article does not constitute regulated financial advice. We recommend taking professional, regulated advice if you have received a pension savings statement or believe you may have exceeded your annual allowance.
Frequently asked questions
5 questions
What is a pension input period?
A pension input period (PIP) is the period over which a pension's contributions or benefit accrual are measured for annual allowance purposes. Since April 2016, all PIPs are aligned to the UK tax year — 6 April to 5 April — for all registered pension schemes. Before April 2016, different schemes could have different PIPs (aligned to their own year-end dates), which created considerable complexity. The 2016 alignment to the tax year simplified matters significantly.
Link to this questionWhat is a pension input amount?
A pension input amount (PIA) is the value of pension saving attributable to a member in a pension input period. For defined contribution (DC) schemes (including SIPPs), the PIA is simply the total gross contributions paid in the period — employee contributions, employer contributions, and any relief at source claimed. For defined benefit (DB) schemes, the PIA is calculated using an actuarial formula based on the increase in the value of the member's accrued pension benefits over the period.
Link to this questionHow is the pension input amount calculated for a defined benefit scheme?
For a DB scheme, the pension input amount is: (Closing value of accrued pension benefit × 16) minus (Opening value of accrued pension benefit × 16), adjusted for inflation. The 'closing value' is the annual pension the member has accrued by the end of the PIP (the pension they would receive if they left the scheme on that date). The 'opening value' is the same but at the start of the PIP, uplifted by the relevant inflation measure (currently CPI). The multiplication by 16 converts the annual pension amount into a capital value for comparison with the annual allowance.
Link to this questionCan I have pension input amounts from more than one scheme in the same tax year?
Yes. The annual allowance applies to your total pension saving across all schemes in the tax year. If you are an active member of a workplace DB scheme, have your own SIPP, and receive employer contributions to a workplace DC scheme, the pension input amounts from all three schemes are added together. The combined total is compared against your annual allowance (standard or tapered). Exceeding the combined total triggers the annual allowance charge.
Link to this questionWhat is the Pension Savings Statement and when should I receive one?
A Pension Savings Statement is a document that pension schemes are required to issue when a member's pension input amount in a tax year exceeds the standard annual allowance. It shows the pension input amount for the current year and the previous three years (for carry forward purposes). For DB scheme members especially, receiving a pension savings statement is often the first indication that an annual allowance issue may exist. If you are an active member of a DB scheme and receive a statement, you should seek professional advice promptly.
Link to this questionThis guide is for general information only and does not constitute financial, legal or tax advice. Pension rules, tax rates and programme details change; verify current requirements with a qualified and FCA-regulated pensions adviser before acting. Pension transfers involving defined benefits over £30,000 require regulated advice.
