What is annual allowance?

Annual allowance is the part of your gross salary that the government allows you to use to build up extra pension tax-friendly. You can do this, for example, by investing or saving. Annual allowance arises when you have reserved too little money for your old age in a certain year, resulting in a pension shortfall.

1. You can calculate your annual allowance for the deduction of annuity premiums using the annuity premium tool from 2016. For this, you need your annual statement, pension accrual, and any carry-forward allowance.

2. If you have not used your annual allowance from previous years, you can still use that amount for your deduction this year. In short, annual allowance offers opportunities to optimise your pension accrual and build up extra pension in a fiscally favourable way.