Under current rules, the maximum gross contributions eligible for tax relief each tax year are the lesser of your gross earned income and £40,000. This includes both employer and employee contributions, and if the Annual Allowance is exceeded, a tax charge is imposed on the excess unless it can be offset by carry forward. The Annual Allowance may be reduced for very high earners.

Increasing your pension contributions is a great way to start saving for retirement. By contributing more to your pension, you can accumulate a larger pot of money that can provide you with a comfortable retirement income.

MAKING THE MOST OF RETIREMENT PROSPECTS

If you have recently received a raise or have come into some extra money, you should think about increasing your pension contributions. You will ensure that you are making the most of your finances and your retirement prospects by doing so. Subject to certain rules, you can also carry forward unused annual allowances from the previous three tax years, giving you even more room to contribute.

Making pension contributions can be extremely beneficial if you earn more than £100,000 per year. Your personal allowance is reduced by £1 for every £2 of income above £100,000, so if you earn £125,140 or more, your allowance is zero. However, if you make a pension contribution, this is deducted from your income figure for this purpose, and if the gross contribution is sufficient to reduce your total income below £125,140, you can offset or remove the reduction in your personal allowance.

Please be aware: A pension is a long-term investment not normally accessible until age 55 (57 from april 2028 unless plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future. You should seek advice to understand your options at retirement. The value of investments and income from them may go down. You may not get back the original amount invested. Past performance is not a reliable indicator of future performance. Investors do not pay any personal tax on income or gains. Tax treatment varies according to individual circumstances and is subject to change. Stocks and shares ISAs invest in corporate bonds; stocks and shares and other assets that fluctuate in value.

If you need advice regarding your pension, contact us today.