Frequent chopping and changing of tax rules means that important opportunities to make the most of your current pension allowances can often go un-noticed. Are you making tax relief work for you? Do you know what your current annual allowance is and are you making the most of it? Can you carry forward any unused allowance from previous years?
Our range of FREE factsheets could help you navigate your way through the current pension allowances and help you make the most of what’s available to you this tax year. Remember, you have until the 5th April to take advantage of this year’s current allowances - which are explained in more detail in the range of factsheets below.
Tax relief is a valuable pension tax benefit that can help you save for retirement. Simply pay into your personal pension and the government will top it up for you with basic rate tax relief of 20% (the overall amount of tax relief you receive depends on how much you earn, what rate of Income Tax you pay and the type of pension you belong to).
No tax relief is provided on any contributions made by an employer.
It’s also important to remember that you will only get tax relief on contributions up to the amount you have actually earned in the relevant tax year.
The annual allowance is a limit on the amount that can be contributed to your pension each year while still receiving tax relief. For the current tax year it is £40,000. If you have income above £110,000 your annual allowance may be reduced. For more information take a look at the 'Tapered Annual Allowance' tab.
You are currently entitled to tax relief on pension contributions up to the total amount you earn in a year, or up to £40,000 (your ‘annual allowance’), whichever is lower.
It may be possible to pay more into your pension and still benefit from tax relief by carrying forward unused allowances from previous years. You can find out more in the ‘Carry Forward’ tab.
Important; If you’ve already taken flexible benefits from your pension a lower annual allowance limit of £4,000 may apply. Download our MPAA (money purchase annual allowance) factsheet here for more information.
Since the 6th April 2016 the amount you can pay into your pension may be tapered according to your income. Anyone with 'adjusted income' over £150,000 could be affected. Their allowance will reduce by £1 for every £2 that exceeds £150,000. Those with 'adjusted income' of more than £210,000 could see their allowance reduced to a minimum of £10,000.
Anyone with 'adjusted income' of less than £150,000 a year should not be affected by the tapered annual allowance. However, it’s important to remember that income in this context includes not just your earnings, but any returns from investments you hold outside of tax wrappers and, critically, the value of any pension contributions made by your employer.
Did you know that you might be able to contribute up to £160,000 to your pension this tax year (until 5th April 2018) whilst benefiting from tax relief? You can do this by carrying forward unused allowances from the previous 3 tax years.
Remember you must have been a member of a UK registered pension scheme in the relevant tax year from which you wish to carry forward from and have earnings at least equivalent to the contribution you wish to make in order to receive full tax relief.
If you think the combined value of your pensions could exceed the lifetime allowance by the time you retire, then you might find our ‘Will your pension be hit by the lifetime allowance?’ guide useful.
Please remember, the value of investments can go down as well as up so you may not get back the amount you originally invest. You cannot normally access money invested in a SIPP until the age of 55. The eligibility to invest in a pension depends on individual circumstances and all tax rules may change in the future. Fidelity Personal Investing only gives information about products and services and does not provide investment advice based on individual circumstances. If you are unsure of the suitability of an investment you should speak to an authorised financial adviser.