Firefighter Pension Annual Allowance and Tax 2026/27

The 2026/27 allowances at a glance

GOV.UK says your annual allowance is the most you can save in your pension pots in a tax year (6 April to 5 April) before you pay tax, and that it is £60,000 in the current tax year. It applies across all your private pensions and counts the total paid into money purchase schemes and any increase in the value of defined benefit schemes. You may be able to carry forward unused allowance from the previous three tax years if you have used all of the current year’s allowance.

GOV.UK’s lump sum allowance page says you can usually take up to 25% of the amount built up in any pension as a tax-free lump sum, up to a maximum of £268,275, and that some lump sums, such as serious ill-health lump sums and certain death benefits, count towards a separate lump sum and death benefit allowance of £1,073,100. The lifetime allowance was abolished on 6 April 2024, with transitional protections still relevant for some people. For the scheme itself see the FPS 2015 guide.

The official firefighter pension website’s tax page quotes the same lump sum allowance, gives £1,073,100 for the lump sum death benefit allowance, and explains that your pension is taxed as income through PAYE when you retire, with no National Insurance on pension income.

How the annual allowance test works for a defined benefit pension

Unlike a personal pension, a firefighter pension is not a pot, so HMRC measures the annual increase in the value of your promised pension. The HMRC pensions tax manual describes the calculation: multiply the annual pension at the start of the pension input period by 16 (the opening value), increase it by CPI to the September before the tax year, then compare it with 16 times the annual pension at the end. The difference, if positive, is the pension input amount for that scheme.

For a CARE pension in FPS 2015, an ordinary year’s input is broadly the new pension earned plus any revaluation above CPI, times 16. Suppose the opening pension is £8,000 and, in 2026/27, revaluation is 4.8% against CPI of 3.8%, and pay of £40,358 earns £676.01. Closing pension is £8,000 × 1.048 + £676.01 = £9,060.01. Opening indexed by CPI is £8,000 × 1.038 = £8,304. The difference is £756.01, and × 16 = £12,096, far below £60,000.

The example uses the 4.8% earnings revaluation and 3.8% CPI figures reported for 2026; the exact indexation rules and dates for your scheme year are in HMRC’s manual and your pension saving statement. For a normal CARE build-up, therefore, the annual allowance is rarely an issue.

When firefighters do exceed it: final salary slices and promotion

The legacy 1992 and 2006 slices are final salary. If you were promoted, your pay rose sharply and the final salary link raised the value of your legacy pension in a single year, the increase counts in full for the annual allowance. Take a simplified illustration: a legacy pension of £25,000 built on final pay of £50,000, followed by promotion to £65,000, a rise of 30%. The pension value would rise to about £32,500. Opening £25,000 × 1.038 (CPI 3.8%) = £25,950. The increase of £6,550 × 16 = £104,800, which exceeds £60,000 by £44,800.

In real life the calculation is more nuanced, and the excess can be covered by carry forward of unused allowance from the previous three years, which is why many people do not pay a charge. But it shows why officers with legacy service and large promotions are the group most likely to receive a pension saving statement. Any backdated pay award can also push a year over the limit; the LGA publishes a factsheet on the annual allowance impact of a backdated pay award.

The official website adds that in some cases changing your remedy choice may change the pension you are treated as having built each year, so you may have already paid a tax charge or may owe tax for the first time as a result of remedy choices.

Tapered annual allowance for higher earners

GOV.UK says you have a reduced (tapered) annual allowance if both your threshold income is over £200,000 and your adjusted income is over £260,000. The allowance falls by £1 for every £2 of adjusted income above £260,000, down to a minimum of £10,000 as reported by pension providers and guidance for the current rules. The tapered allowance mostly concerns chief officers and others with high total incomes, including income outside the fire service.

For an illustration, adjusted income of £300,000 is £40,000 over the £260,000 limit, so the allowance falls by £20,000 to £40,000. Because pension input for a DB scheme includes the pension growth of the year, a higher-paid officer might have a lower allowance and a bigger input than a colleague at £60,000 pay. Adjusted income includes employer pension input, so it can be higher than salary.

If you might be affected, keep records of all income, seek advice from a tax adviser who knows public service schemes, and check GOV.UK’s calculator. Most firefighters below chief officer level are not near these thresholds.

Charges, scheme pays and reporting

If you go over the annual allowance, GOV.UK says either you or your pension provider must pay the tax, and you must report it in the Pension savings tax charges section of a Self Assessment tax return, even if the provider pays all or part. The official firefighter website says that if a charge is over £2,000 you might be able to ask the scheme to pay it, recovering the sum from your pension benefits when they start; this is scheme pays, and specific timescales apply.

Scheme pays reduces your eventual pension. The reduction is worked out using actuarial factors, so it costs more than the tax it defers. Compare it with paying the tax from current income. The pension saving statement in your ABS notes that scheme pays debits are usually included on your annual statement and the figures reduced to meet the charge, and will be recalculated when you take your pension.

Remedy members had extended scheme pays deadlines: 6 July 2025 for active and deferred members and 6 July 2027 for pensioners, and HMRC adjustment submissions are due by 6 July 2027. GOV.UK also says HMRC does not tax anyone for going over their annual allowance in a tax year if they retired and took all their pension pots because of serious ill health, or died.

Lump sum allowance, protected pension age and unauthorised payments

The official website says the value of your benefits for lump sum purposes uses the formula (20 × annual pension) + lump sum, and that a lump sum above the allowance is unauthorised and subject to a 40% tax charge on the excess. For most firefighters the 25% commutation limit means they are well below £268,275. As an illustration, a pension of £20,000 before commutation, taking the maximum 25% at £12 for each £1 gives a lump sum of £60,000 and a reduced pension of £15,000, so the value used is 20 × £15,000 + £60,000 = £360,000. A quarter of that is £90,000, comfortably above the £60,000 taken, and the £60,000 is well inside the £268,275 lump sum allowance.

There is a special risk for 1992 members retiring before 55. The scheme’s protected pension age of 50 can be lost in some circumstances, in which case payments before 55, including any lump sum, are unauthorised. The charges listed are a 40% unauthorised payment charge on the member, a 15% scheme sanction charge on the authority and a 15% unauthorised payment surcharge on the member. Check before you retire early. See FPS 1992 explained.

For lump sum planning use the free lump sum calculator and the commutation guide.

If you receive a pension saving statement

A pension saving statement means your administrator believes your pension input exceeded the allowance in a tax year. It is not itself a tax bill. It tells you the numbers you need to check whether a charge arises after carry forward and to complete your Self Assessment return. Read it as soon as it arrives, because the deadlines for scheme pays are strict.

Start by checking that the pay and service used are correct, whether a backdated pay award has been assigned to the right year, and whether the remedy has changed the figure. Then work out whether you have unused allowance from the previous three tax years, which may be enough to remove the charge. The annual benefit statement guide explains where pension growth appears each year, and the remediable service statement guide explains re-testing.

If a charge remains, compare scheme pays with paying from income, and think about how it fits with your plans for a lump sum and retirement age; see firefighter pension lump sum and commutation, the FPS 1992 guide and the contribution rules in firefighter pension contributions 2026/27. Extra contributions or opting out can change pension input, so read firefighter pension opt-out before acting.

Practical tax steps for 2026/27

Most serving firefighters need only a light-touch routine. Use this list in your annual statement season and before any big pay change or planned retirement.

1. Read your annual benefit statement’s pension growth section and note whether a pension saving statement was issued.
2. Before a promotion or large pay rise, ask your administrator to estimate the effect on legacy pension input.
3. Tally income and pension across all schemes if you have a second job, other pensions or high income.
4. If a charge arises, compare scheme pays with paying from income, and note the deadlines.
5. Keep evidence of remedy-related letters and pension saving statements in case HMRC adjustment forms are needed by 6 July 2027.