Did you know that you can make one-off pension payments at any time? In fact, people are encouraged to do so with tax incentives offered by the government. If you have accumulated extra money from a windfall, bonus or through saving, why not consider powering up your pension with a single contribution?
Crunch the numbers
Tax relief is available on contributions up to a maximum of £3,600 a year or 100% of earnings, whichever is greater, with the level of relief dependent on a person’s marginal rate of Income Tax. For instance, a £1,000 lump sum contribution could effectively cost a higher rate taxpayer just £600, after receiving £200 basic rate tax relief from the government and claiming £200 in additional relief from HMRC.
Allowances
During the 2023/24 tax year, the annual contribution limit for tax relief purposes is 100% of a person’s salary or £60,000, whichever is lower, although unused allowance from the previous three tax years can be carried forward.
Future focus
Paying a lump sum into a pension can be an effective way to save for your future. Making a single contribution basically enables people to go above and beyond their regular commitments and move closer to achieving their pension saving goals. If you want to make the most of your available allowance(s), we can help you power up your pension.
It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.