The consultation this summer led us to believe that the annual allowance for pension contributions would be reduced to a £35,000 with effect from 6 April 2011. Instead the final figure has been set at £50,000 a year. 

However, the draft rules also insert new clause enabling a carry-forward of unused annual allowances for up to three years. So this will ease the situation for those with irregular incomes, who might choose to make large payments on an infrequent basis. 

You need to be a member of a pension scheme in order to generate an allowance that can therefore remain unused. The full £50,000 is available for carry forward, should your total contributions in any given tax year be nil. Unused allowances may be used in chronological order, i.e. the earlier year in preference to a later year. 

As usual complicated transitional provisions have also been introduced for the 2011/12 tax year. There will be two separate pension input periods, a “pre-announcement” period, where the pension input period ends in 2011/12 and begins before 14 October 2010, and a “post-announcement” period.  

Any other pension input period which ends in 2011/12 is a “post-announcement” period. The pre-announcement period is subject to the ‘old’ rules governing the amount of annual allowance, and the post-announcement period is limited with reference to the new £50,000 limit. 

The transitional rules also assume an annual allowance of £50,000 for each of the three tax years preceding 2011/12 which is available for carry forward and use, assuming, of course, pension contributions in those years have not already used this notional annual allowance.  

As always pensions require advice – so make sure you take independent financial pensions advice before proceeding with any plans.