Members of UK pension schemes qualify for tax relief as follows:
- your normal employee contributions and Additional Voluntary Contributions (AVCs) attract tax relief at your highest marginal rate of income tax;
- when you retire and take your retirement benefits, you can take part of those benefits as a tax-free lump sum. However, your pension income is taxed as earned income under PAYE.
However, pension benefits which qualify for tax relief are restricted to two maximum allowances permitted by HM Revenue & Customs (HMRC): the Annual Allowance and the Lifetime Allowance.
For more information, please refer to the Lifetime Allowance (LTA) and Annual Allowance (AA) guidance pages.
USS has options for dealing with the LTA and AA - Enhanced opt out and Voluntary Salary cap. Details can be found on the USS website.
The University provides a cash supplement to salary in place of pension provision for those who are adversely affected by pension tax allowances, subject to certain eligibility criteria. For more information, please refer to the Pension Cash Supplement guidance pages.