The annual allowance is the amount of money an individual is allowed to invest each year into a private pension that attracts tax relief.
This has recently been amended by the government from £255,000 a year down to £50,000 a year. There are lifetime limits on the amount you can save. Again, this has recently been amended by the government from £1,800,000 which is the limit for the 2011-12 financial year, to £1,500,000 for 2012-13.
Everyone can save more than this, either annually or over their lifetime, but tax will need to be paid on the excess above the limits.
The annual allowance is designed to allow individuals who did not start a pension until later in life to be able to catch up.
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