Frequently Asked Questions
What is the most I can contribute to my pension?
There is no limit on the amount of contributions that can be paid to a registered pension scheme by you, or on your behalf. However, there are limits on the amount of tax relief these contributions will attract.
Your personal contributions will receive tax relief up to the higher of £3,600 and 100% of earnings in the tax year of payment. There will be no facility to use prior year's earnings or to carry forward or carry back contributions.
Your employer can pay unlimited contributions, normally with full tax relief, on your behalf.
The annual allowance is a further mechanism by which HM Revenue & Customs (HMRC) limits the amount of tax privileges on pension savings. Where the increase in your pension savings in a year exceeds the annual allowance, a tax charge of 40% is payable by you on the excess.
The increase in your pension savings is the total of the contributions paid by you, or on your behalf, to all registered pension schemes and, if you are a member of a final salary pension scheme, includes the value of any increase in benefits under that scheme.
The annual allowance is:
| Tax Year | Allowance |
|---|---|
| 2006/07 | £215,000 |
| 2007/08 | £225,000 |
| 2008/09 | £235,000 |
| 2009/10 | £245,000 |
| 2010/11 | £255,000 |
There is no annual allowance test in a year if all of the benefits under the pension arrangement are taken before the end of that year.
Full concurrency is allowed, i.e. you can be a member of a SIPP, personal pension and company pension scheme at the same time.