Pensions aren’t just something you pay into, but don’t think about until you’re ready to draw them. It is important to keep track of them, to ensure you get the maximum benefit.
Consider the following to maximise your retirement income and tax relief on contributions.
Make the most of your allowances
Each year you can contribute up to your annual earnings, or £60,000, (whichever is the lower), into your pension and still benefit from tax relief. Additionally, if in the past three years you’ve not used your full pension allowance (the lower of £180,000, or 3 times your annual earnings), you can carry that allowance forward. Meaning you can pay additional pension contributions and still get tax relief.
Different rules apply to those earning over £260,000 a year, where the tapered annual allowance could come into play.
Claim your tax relief
Basic rate taxpayers should get relief automatically so don’t need to claim it. You won’t need to claim tax relief if your pension is a net pay arrangement (pension contribution is taken from your salary) or includes a salary sacrifice arrangement. Higher rate taxpayers might need to claim relief depending on your pension provider.
Some work pensions and a lot of private pensions are set up as relief at source. If so, you will need to claim the extra tax relief through self-assessment. If you are unsure, check.
Employer contributions
The minimum contribution your employer should make is 3%, but often they will increase their contribution if you increase your contribution. So, it is worth checking if that is the case.
Missing pensions
Many people may have multiple pensions throughout their working life, there are ways of finding previous pensions e.g. the Government’s Pension Tracing Service. Once you have found any ‘missing’ pensions you can decide what the best options are for them.
We strongly recommend that to ensure your pensions work in a way that maximises both your retirement income and any tax relief, you contact us for advice.
19 February 2024
The views expressed in this blog do not in any way constitute advice and are specific to the date noted. As time passes the facts can change and readers should consult their adviser for up to date advice on any matters covered within the blog. Invest Southwest offers an initial review, which is free of charge, however long it takes. From this we will be able to confirm how we can help and give you an opportunity to decide if you would like us to. Thereafter, we will provide you with detailed recommendations and exact costs. Please note that we promise not to levy any kind of fee unless we can demonstrate a benefit to you.
