What is the Annual Allowance (AA)
The AA is a limit to the amount of pension you can build up during what’s called a Pension Input Period (PIP) and still receive tax relief. The PIP for USS is the period which is 1 April to 31 March each year.
If you exceed the AA the excess amount over the AA will be added to your taxable pay and you will pay tax at the appropriate rate applicable under the PAYE system. There is however scope to utilize unused allowances from up to the previous 3 years.
In the 2010/2011 tax year the AA was £255,000 but this has now been reduced by HM Revenue and Customs (HMRC) to £50,000 from the 2011/2012 tax year.
This means that more people are likely to be affected although you would need a significant amount of service and salary to exceed the £50,000 limit in USS, or perhaps receive a large pay increase.
The modeller below will calculate if you are close to, or are exceeding the Annual Allowance. As well as this it will show you what pension you have built up (up to the given calculation date) and what you will have at your chosen retirement age. It also shows the tax-free cash sum, death in service lump sum benefit and spouse's pension in the event of your death.
If the modeller indicates you have or are close to exceeding the Annual Allowance, you should request a full quotation from USS via the pensions contact at your employer.
The modeller is not designed to deal with the more complex pension histories or unusual personal circumstances and therefore, will not be appropriate for some categories of member. These include members who:
• Are Mental Health Officers
• Are absent or whose membership is suspended at the service statement date
• Are variable time employees
• Are in the process of applying for ill-health retirement,
• Are subject to a pension sharing order or have earmarked benefits.
If you are affected by these exclusions, please refer to USS.
Please note the following:
The modeller is intended as a general guide only and is based on current rules. If you would like specific guidance or are approaching retirement and need a full quotation, please speak to the pension contact at your institution.
If you select a retirement date earlier than age 65, the modeller will produce a result based on the assumption that early retirement is with the consent of your employer. Please note factors used may change over time.
If you intend to retire without the consent of your employer, please obtain a quotation from USS.
If you are part-time, the benefit modeller is only able to project future service using your current part-time service fraction. If your part-time service fraction is subject to change, please request a quotation from USS. All benefits are subject to Inland Revenue limits at the time of payment. Please note that this may affect you if your salary is in excess of the earnings cap.
If you have transferred benefits in to USS from another pension arrangement these benefits may be reduced early if you retire early.
If the transfer was agreed after 1 April 2009, the benefits transferred-in will be reduced if you draw those benefits before age 65. The modeller can only calculate this reduction if you login, rather than entering the data manually. If the transfer was agreed before April 2009 benefits may be reduced if you retire before age 60 and the transfer value was received within 7 years of your early retirement. Full details are available in the transfer to USS factsheet.