Maximising your pension fund

Despite a constantly shifting pensions landscape, planning and saving for retirement are as important as ever. A pension is a highly efficient way of saving, giving you tax relief at your marginal rate of income tax on eligible contributions of £60,000 per year or 100% of earnings, whichever is lower.

The Tapered Annual Allowance

Understanding the tapering of your annual allowance can be complex.

From 6 April 2020, tapering happens if your adjusted annual income is more than £260,000. Tapering reduces your annual allowance by £1 for each £2 that this is exceeded, to a minimum of £10,000.

Carry Forward of unused contributions

You might be able to contribute more than the current tax year’s Annual Allowance of £60,000, or your tapered annual allowance, if applicable. If so, you’ll potentially receive tax relief at up to 60% using Carry Forward.

Carry Forward can work for you if you’ve contributed less than the Annual Allowance in the previous three tax years and were a member of a UK registered pension scheme during that time.

Your Lifetime Allowance

The lifetime allowance for pensions in the UK underwent changes starting from 6 April 2024. Previously, the LTA was the maximum amount you could save into a pension without incurring additional tax. However, as of the mentioned date, it has been replaced with three new allowances:

1. Lump sum allowance: £268,275
2. Lump sum and death benefit allowance: £1,073,100
3. Overseas transfer allowance: £1,073,100

Remember that the LTA ended on 5 April 2024. These new allowances provide clarity on the maximum pension savings thresholds. If you have any further questions or need additional information, feel free to ask!