For most people, the annual allowance is currently £40,000. This is the amount of pension contributions that can be made by an individual that they can receive tax relief on. There is still the ability to carry forward unused allowance from up to three previous years.
The change announced in the 2016 Autumn Statement affects those people who have already flexibly accessed some taxable income from their pension. This has previously seen the annual allowance reduce to £10,000 but from April 2017, this will now reduce to £4,000 per annum.
This is designed to stop people enjoying double pension tax relief, by taking an income from the pension and then reinvesting this amount to obtain tax relief again.
This will make it more difficult for those people who want to phase their retirement by accessing an income and continue to work taking advantage of the auto enrolment rules.