For a defined benefit pension, the annual allowance tests the rise in value of your promised pension in the tax year, not what is paid in.
That rise is called the pension input amount, and the way it is built, from a 16 times multiple of pension earned and an opening value uplifted by CPI, is set out below. Your own scheme holds the figures. If you want them read alongside your other pensions, the short form below leads to a phone call, with no charge, in which an FCA-authorised adviser can talk those figures over with you.
How does the annual allowance work for a defined benefit pension?
HMRC's Pensions Tax Manual separates the types of pension. For a money purchase pot the contributions paid are tested; for a defined benefits arrangement it is the growth in the value of the benefit rights. GOV.UK lists the same two inputs: payments into a defined contribution scheme, and any rise in a defined benefit scheme over the year. Final salary and career average schemes both fall on the defined benefit side.
Each tax year the amounts from every arrangement you have are added together, and that total is "measured against the individual’s annual allowance for the tax year". Since 2016 to 2017 the pension input period, the stretch over which the increase is measured, has run 6 April to 5 April, the same as the tax year. The standard allowance is £60,000 for 2026 to 2027 according to HMRC's rates page. A reduced allowance for high earners is covered in the taper guide, and the overall allowance across all your pensions in the annual allowance guide.
Going over the allowance does not block the saving: the part of the total above it "is subject to the annual allowance charge", which the tax charge guide explains, and unused allowance from earlier years may soften it, as the carry forward guide sets out. The rules apply to UK registered schemes, or to overseas schemes where you or your employer qualifies for UK tax relief. For what a final salary pension pays, see its own guide.
How is the pension input amount worked out for a final salary pension?
Your saving in a defined benefits arrangement for the year is the amount by which the value of the benefits promised to you went up over the pension input period. That increase is the closing value minus the opening value, and both are "notional ‘capital’" values rather than money anyone holds. HMRC's Pensions Tax Manual describes the opening value like this:
The opening value of the member’s benefits can be thought of as the amount of money that might be needed to provide the expected benefit.
— HMRC Pensions Tax Manual, PTM053301, accessed 21 October 2026
It is found in four steps:
- Annual pension built up. Find the pension that had built up "immediately before the start of the pension input period".
- The 16x factor. "Multiply the annual amount of that pension by 16."
- Any separate lump sum. Where the scheme gives a lump sum on top of the pension (many public sector schemes do, without the member giving up pension for it), add the amount built up at the start.
- The CPI uplift. "Increase the total after step 3 by the 12 month increase in the CPI to the September before the start of the tax year for which the calculation is being done." GOV.UK words it as the Consumer Price Index "for the previous September".
The closing value repeats the first three steps for the pension and any separate lump sum built up by the end of the year, but misses out "the final step in respect of the CPI increase". In effect the test asks whether your promised benefits grew by more than inflation, on a scale that values the yearly pension at sixteen times its annual amount. The CPI figure itself is published by the Office for National Statistics.
If the sum comes out negative, the saving is not negative: the input amount "is nil for that pension input period".
A worked example from HMRC's manual, tax year 2011-12
This is an old-year example: it uses 2011-12 figures to show the method, not current ones. HMRC's rates page gives the annual allowance as £50,000 for 2011 to 2012, against £60,000 for 2026 to 2027, so the sums cannot be read across to this year.
Chris's scheme pays a pension of 1/80th of final pay for each year of service plus a separate lump sum of 3/80th of pensionable pay for each year, with pensionable pay being "pay received over the last 12 months". At the start of 2011-12 his pay was £45,000 and he had 24 years' service; by the end, after a promotion in September 2011, his pensionable pay was £59,600 and HMRC's closing workings use 25/80. HMRC's figures:
| Step | Opening value (start of 2011-12) | Closing value (end of 2011-12) |
|---|---|---|
| Annual pension | 24/80 x £45,000 = £13,500 | 25/80 x £59,600 = £18,625 |
| Multiply by 16 | £13,500 x 16 = £216,000 | £18,625 x 16 = £298,000 |
| Add separate lump sum | £216,000 + (24 x 3/80 x £45,000) = £256,500 | £298,000 + (25 x 3/80 x £59,600) = £353,875 |
| CPI uplift | £256,500 x 1.03 = £264,195 | No uplift |
HMRC's result is a pension input amount of £89,680 (£353,875 minus £264,195), which it notes was £39,680 more than the annual allowance for 2011-12 of £50,000. The 3% CPI rate was assumed "for the purpose of this example", not taken from any real September. The example is not a calculation of anyone's tax.
If a promotion or pay rise has landed late in a period for you, mention it when you request a call-back, and your scheme's figures can be talked through by an FCA-authorised adviser.
What can change the closing value?
The manual says "Certain events can cause the closing value of the member’s benefits to be more or less than it would otherwise be", and the closing value for the year is adjusted when one occurs. Its list includes:
- a transfer payment being made or received;
- a pension debit or pension credit being implemented;
- "a BCE has occurred (the most likely being when the member starts to take some or all of their benefits)"; and
- the member's benefits being reduced because the scheme paid part of an annual allowance charge.
Each adjustment "applies only for the pension input period in which the event occurred", so it does not carry into the next year's opening value. A transfer in, for example, has the benefits it funds deducted before the closing value is found, which stops a transfer looking like a year's saving. How a transfer value is worked out is a separate subject, in the transfer value guide.
Public service schemes have a further rule. "From 6 April 2023", where someone has rights in both a legacy public service pension scheme and the corresponding reformed scheme for the same pension input period, the reformed scheme's input amount "must be reduced (but not below zero)" by the amount by which the legacy scheme's opening value exceeds its closing value. NHS members will find their scheme's statements and deadlines in the NHS pension tax relief guide, and how the council scheme works is in the LGPS guide.
How do you find your own pension input amount?
You do not usually have to calculate it. Under HMRC's Pensions Tax Manual, a scheme administrator must send a pension savings statement automatically to an active member (or, in certain circumstances, a deferred member) whose pension input amounts under that scheme for the year are more than the annual allowance amount in section 228 Finance Act 2004. That test ignores the tapered allowance, so someone whose allowance is reduced may not get one automatically, and the usual deadline is 6 October after the tax year ends. Anyone without an automatic statement can ask the administrator for their input amounts. Whether a deferred pension counts in your own case is a question an adviser can go through free once you have filled in the enquiry form.
GOV.UK says your pension provider will send a statement if you go above the allowance in their scheme. The annual benefit statement a scheme sends is not the same thing: members are warned to "be careful to check that the statement is an appropriate starting point for the estimated pension input amount tax calculation".
With several schemes, each gives its own figure and they are added together, so a defined benefit pension and a workplace defined contribution pot share the one allowance. If your total looks close to the limit, lining up the statements is the sensible first step.
Questions about defined benefit pensions and the annual allowance
Does pension growth count towards the annual allowance?
For a defined benefit pension, yes, in the sense that the increase in the value of the promised benefits is what is tested. For a defined contribution pot, GOV.UK counts "the total amount paid in" to the scheme in the year by you or anyone else, such as your employer, rather than the pot's value.
Can a fall in value cancel out other pension saving?
No. HMRC's worked example for the year ending 31 March 2012 has a member whose defined benefit closing value was lower than the opening value, giving a nil input amount, plus £10,000 paid into a money purchase arrangement in the same scheme. HMRC notes the fall "does not create a ‘negative value’" to offset the £10,000.
Is there a calculator for a defined benefit pension?
GOV.UK's guidance on unused allowance points to a calculator, but says it cannot be used where a scheme mixes defined benefit and defined contribution features, a "hybrid scheme"; then you work out unused allowance yourself. Either way, the inputs are pension and lump sum figures from the scheme.
Does a council or NHS pension count?
Yes. The allowance covers all your pensions in UK registered schemes, and HMRC's defined benefits rules deal with public sector schemes directly: their separate lump sums go into the valuation, and members with both legacy and reformed scheme rights have the 6 April 2023 rule above. Your figure comes from the scheme's administrator, on a pension savings statement or on request.
What about a final salary pension and the lifetime allowance?
The lifetime allowance is a different limit from the annual allowance, and it is covered in the lifetime allowance guide.
Next step
The pension input amount depends on pay, service, the scheme's accrual rate and the CPI figure for the year, none of which are on this page. Your statements are easier to judge next to your other pensions. The enquiry form takes your number; an FCA-authorised adviser then rings to go over the statements with you, at no cost. Whoever you speak to about your pension, the FCA's pension scams page is worth reading first. How relief is given on what you pay in is covered in the pension tax relief guide, and tax on pension income in the pension tax guide.
Sources
Pages read on 21 October 2026.