By reviewing your pension contributions early, not only could you feel more in control of your financial future, you could also avoid the last-minute stress of trying to organise your investments before the deadline on 5th April.
Why are pensions so important?
It’s easy to think of pensions as something you’ll sort out later in life, closer to retirement. But the truth is, your pension could be your ticket to financial freedom, helping you live your best life when the time comes to relax and enjoy those golden years. Consider it like planting a tree: the more you water it (or contribute), the stronger and larger it could grow over time. Pensions also come with the added bonus of tax relief from the government automatically applied, which means a 25% top-up on your contributions for basic rate taxpayers (higher rate tax payers could claim even more!).
A key point often overlooked is the earlier you start, the more your pension could grow. Early planning really can make a huge impact! Paying what you can afford towards your pension early in your career can make a huge difference in ensuring a brighter, more secure retirement. This is because your investments have more time to potentially grow, meaning small amounts in your 20s could really add up by the time you retire. But it’s never too late to start saving for retirement, it’s just important to get started.
Use our pension calculator to see the impact.
Pension Contributions and Tax Relief: How Does it Work?
Whether you’re a pension pro or just starting out, it’s important to know how much you can pay into your pension and still get tax relief. For every personal contribution you make, the government will apply tax relief automatically, which means a 25% top-up on your contributions for basic rate taxpayers. If you're a higher or additional rate taxpayer, there’s even more good news! You can claim further tax relief through your self-assessment, up to 45%. Paying into your pension is an easy way to boost your savings while also saving on taxes!
Log in you your account to discuss your options with your Pension Adviser today
Contribution Limits: How Much Can You Pay In?
Individuals can contribute up to £60,000 to their pension each year, or up to the amount of their pre-tax income—whichever is lower. However, this figure includes both the money you contribute, and the tax relief added at source, so it's essential to track how much tax relief is being added to your contributions to ensure you don’t exceed your allowance limit.
Earners: Contribute up to £60,000 per tax year. If you earn more than £60,000 per year, you can take advantage of unused contribution limits from previous years by using the carry forward rule.
Non earners: Even if you're not earning, you can still contribute £3600 per tax year.
Business or Employers: As a director, you can make pension contributions through your company, and there is no upper limit to how much the company can contribute to your pension, as long as it is deemed “reasonable” and justifiable by the company’s profits. Pension contributions made by your company are treated as a business expense. This means the company can deduct the contributions from its profits, reducing the overall tax liability of the business.
If you haven’t used your full allowance in previous years, you may be able to carry it forward to increase your pension contributions. If you would like to discuss carrying forward and making the most of your previous years' allowances, please don't hesitate to get in touch with your Pension Adviser in your secure, online account. We're here to help you navigate your options.
How to Contribute to Your Pension
As the end of the tax year approaches, don’t miss out on the chance to maximise your pension contributions and take full advantage of the tax relief available to you. Whether you’re an earner, non-earner, or business owner, there are opportunities to boost your pension savings and work towards a brighter financial future.
Don’t wait until the last minute - review your pension contributions now, and take control of your financial future. It’s a simple step that could make a huge difference when it comes to achieving your retirement goals.
