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 pension and the government will top it up for you (the 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.)
It’s also important to remember that you will only get tax relief on contributions up to the amount you have actually earned.
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 capped at £40,000 if you earn less £150,000. If you earn more than this your annual allowance may be reduced. (Take a look at the ‘Tapered Annual Allowance’ tab for more information) 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 £10,000 may apply. Download our MPAA (money purchase annual allowance) factsheet here for more information.
This tax year saw some significant changes to pension rules for high earners. On the 6th April 2016 the amount you can pay into your pension was tapered according to your income. Anyone earning over £150,000 could be affected and those earning more than £210,000 could see their allowance reduced to £10,000.
Anyone earning less than £150,000 a year should not be affected by the tapered annual allowance, though it’s important to remember that earnings includes returns from any investments you hold that are not held in tax wrapper such as ISAs.
Did you know that you might be able to contribute up to £170,000 to your pension this tax year (until 5th April 2017) 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.
Don’t forget, from 6th April 2017, the start of the new tax year, the amount that can be paid into a pension using carry forward will fall by £10,000, so consider acting before the window closes.
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.