• The pension input amount is the gross contribution paid by the individual and third party contributions paid on their behalf. It also includes the contributions made by their employer.
• Contracted out payments are not included.

Bob’s personal pension arrangement has a PIP that runs from the 22 October to the following 21 October. During the PIP that started on the 22 October 2010 and ended on the 21 October 2011 period he paid gross personal contributions of £10,000 and his employer paid in £12,000. The total pension input amount in respect of the arrangement for the tax year 2011/2012 is £22,000.

• The input amount is the increase in the value of the rights accrued to the individual under the arrangement during the PIP of the arrangement that ends in the tax year.
• The increase in value is the difference between the opening and closing value of those rights for the PIP.
• The increase in pension rights is multiplied by a factor of 16. Increases in lump sum rights are taken at their face value.
• The opening value of the pension rights is increased by the Consumer Price Index (CPI) applicable for the September before the start of the tax year. The CPI figures for valuing pension inputs for the 2011/12 and 2012/13 tax year are:

The PIP for the Teachers Pension Scheme runs from 1 April to 31 March each year. The pension benefit accrues on an n/80th accrual rate. Cash is paid in addition and is calculated on a 3n/80th accrual.

Tim has completed 10 years in the Teachers Pension Scheme on 1 April 2011. Tim’s average salary on that date is £50,000. His pension entitlement on that date is £6,250 (10 x 1/80 x 50,000), and lump sum is £18,750 (3 x 10/80 x 50,000).

By the 31 March 2012 Tim’s average salary has increased to £54,000. His pension and lump sum benefits have increased to £7,425 and £22,275 respectively.

The opening value of pension and lump sum rights needs to be increased by CPI. The relevant CPI factor to use for PIPs ending in the 2011/12 tax year is 3.1%. The opening value of the pension and lump sum rights are £6,443.75 (£6,250 increased by 3.1%) and £19,331.25 (£18,750 respectively.

The pension input amount in respect of Tim’s pension rights are £15,700 ((7,425 x 16) – 6,443.75 x 16) and lump rights £2,943.75 (22,275 – 19,331.25). The total pension input in respect of the scheme is £18,643.75 for the 2011/12 tax year.

Some Final Salary Schemes have produced Annual Allowance calculators which can do these calculations for you. The following links are calculators provided by various large defined benefit schemesthe Teachers Pension Scheme and NHS Pension Scheme Respectively.

This is a type of money purchase arrangement where the pension pot available to purchase benefits is not calculated purely by reference to the contributions made under the scheme and the investment return made thereon. Effectively, the capital amount available to provide benefits does not derive from contributions made year on year.

• The input amount is the increase in the value of the individual’s rights under the scheme during the pension input period of the scheme that ends in the tax year.
• The increase in value is the difference between the opening and closing value of those rights for the PIP.
• For PIPs ending in the 2011/12 tax year and thereafter, the opening value of the pension rights is increased by the Consumer Price Index (CPI) (CPI rate is the annual rate applicable for the September before the start of the tax year. Refer to the table above).
• The closing value is adjusted to add back any transfers out or partial benefit crystallisation events, and subtract the value of any transfers into the arrangement or contracted-out payments made during the pension input period.

Heather’s pension input period begins on 3 December 2010 her opening value on that date was £150,000 and the closing value on 2 December 2011 was £165,000. Heather’s pension input for 2011/12 is £10,350 (£165,000 – (£150,000 x 1.031)).

The benefits under this kind of arrangement could be calculated as a mixture of the above (money purchase, defined benefit or cash balance). Since it will be impossible to know which character of pension benefit will be paid until that point, the pension input must be calculated on the basis that it will be provided by each different type. The pension input amount for any particular tax year will be the greatest of these amounts.