Definition: A ‘pension input period‘ is a period of time over which the pension input amount under a scheme is measured so that a check can be made to see if the Annual Allowance for the related tax year has been exceeded. HMRC uses your pension input period (PIP) to calculate your pension contributions and tax relief.
The pension input period, prior to the budget, was specific to each pension arrangement. One person could have more than one pension input period, you could choose how long each PIP ran for and when it ended.
In the summer budget on the 8th of July, George Osborne announced that pension input periods would run in line with the tax year from the beginning of 2016/17. Pension contributions will be calculated from 6 April to 5 April and neither the pension provider nor member has the option to change the date or duration.
In light of this change, the government has introduced split ‘mini’ PIPs for 2015/2016 tax year.
This will be good news to some and may even allow the opportunity to fund a little extra into their pension this tax year. Essentially, you can contribute up to £40,000 between now and the end of the tax year – on top of anything you paid in between the beginning of the 2015/16 tax year and the Summer Budget. You could therefore make pension contributions of £80,000 this tax year if you paid in your full £40,000 allowance before 9 July 2015.