Save and grow your money
A pension is a great way to save and grow your money so that you can see your retirement dreams come to life.
For every penny you pay into our personal pension, we’ll add up to 20% tax relief onto your contributions, which we will claim from HMRC on your behalf. This is equivalent to 20% tax relief on your contributions. Please be aware that, if you pay in more than your annual allowance, you may have to give some of this tax relief back to HMRC.
If you pay income tax above the basic rate, you may be able to claim additional tax relief from HMRC directly. This needs to be done via your Self-Assessment tax return. This will be offset against your total tax liability for the tax year rather than paid into your pension.
The exact amount you can claim depends on your income tax bracket, where you live in the UK and the annual allowance limit for that tax year. You can find out more on gov.uk
Tax relief based on your income
This table shows the different levels of tax relief you can get on a £10,000 investment, based on the three income tax brackets in England, Northern Ireland and Wales.
|UK (exc. Scotland)||20% basic rate||40% higher rate||45% additional rate|
|You pay in||£10,000.00||£10,000.00||£10,000.00|
|Extra 25% (equivalent to 20% at source)||£2,500.00||£2,500.00||£2,500.00|
|Total investment value||£12,500.00||£12,500.00||£12,500.00|
|Extra you can claim via Self Assessment||£0.00||£2,500.00||£3,125.00|
|Total investment cost||£10,000.00||£7,500.00||£6,875.00|
Children under 16 and adults who don’t pay income tax can pay up to £2,880 net into a pension this tax year. With the automatic tax relief top up, the maximum invested will be £3,600.
If you pay income tax in Scotland, you’ll still get our 25% top up but any additional tax relief you can claim from HMRC will differ.
Income tax relief in Scotland
This table shows the different levels of tax relief you can get on a £10,000 investment, based on the five income tax brackets in Scotland.
|Scotland||19% basic rate||20% basic rate||21% intermediate rate||41% higher rate||46% top rate|
|You pay in||£10,000.00||£10,000.00||£10,000.00||£10,000.00||£10,000.00|
|Extra 25% (equivalent to 20% at source)||£2,500.00||£2,500.00||£2,500.00||£2,500.00||£2,500.00|
|Total investment value||£12,500.00||£12,500.00||£12,500.00||£12,500.00||£12,500.00|
|Extra you can claim via Self Assessment||£0.00||£0.00||£125.00||£2,625.00||£3,250.00|
|Total investment cost||£10,000.00||£10,000.00||£9,875.00||£7,375.00||£6,750.00|
Tax relief limits
If both your threshold income is less than £200,000 and your adjusted income is less than £240,000, you’ll get tax relief on all payments until you reach the £40,000 annual allowance limit. If these limits are exceeded, then an annual taper will come into play.
This limit includes the automatic top up, so you only need to pay in £32,000 to enjoy tax benefits on the whole £40,000. If you have an adjusted income of more than £240,000, your annual allowance could be less than £40,000 and as little as £4,000.
You can pay in more than your annual income if you've rolled over any of your allowance.
This means that if you don’t use the full allowance in a tax year, you can roll the remaining balance over for up to three years. So if you rolled over £10,000 and earn under £240,000, your allowance next year would be £50,000.There's also a lifetime allowance of £1.073 million which is the total you can save in your pension. If you pay in more than this, any benefits will be taxed at 25% if taken as a pension, or 55% if taken as a lump sum.
Other tax features
Just like with other pensions, your investments grow free from income tax and capital gains tax.
You can withdraw money from this pension when you turn 55 but continue paying into it until you’re 75. If you pay money in after you’ve started withdrawing, you may be affected by the money purchase annual allowance (MPAA).
This restricts people from getting a second round of tax relief by withdrawing from a pension then paying straight back into the same pension or another one they hold. The MPAA is currently £4,000, meaning you may be taxed extra if you pay in more than this allowance after withdrawing money from your pension. You can’t roll any unused MPAA over into a new tax year.
The exact amount of tax you’ll pay depends on your total annual income and your tax rate. If you’re not sure about the tax relief you’re eligible to receive, we recommend you speak to a tax adviser, accountant or take a look at gov.uk.