How much can I save in pension each year?
The Annual Allowance is the maximum amount you can save into all your pension schemes each tax year without incurring a tax charge.
What is Pension Annual Allowance?
Standard limit: £60,000 per tax year - this includes ALL your pension contributions (personal + workplace + private + any employer contributions).
You can find out more about Pension Annual Allowance here.
But it's not always that simple! Your personal allowance might be different depending on your circumstances.
When your allowance changes
Reduced Annual Allowance 📉
If you're a high earner, your allowance reduces:
- Income £200,000-£300,000: Your allowance gradually reduces from £60,000 down to £10,000
- Income over £300,000: Your allowance is capped at just £10,000
- "Income" includes: Salary + bonuses + benefits + pension payments across the tax year
Money Purchase Annual Allowance 🔒
If you've already started taking pension benefits:
- Your allowance drops to just £10,000 for defined contribution pensions
- This applies once you've "flexibly accessed" any pension pot
Carry Forward Allowance 📈
Good news! You can potentially use unused allowances from the previous 3 tax years to contribute more than £60,000 in one year. Ask your IFA or pensions provider about it.
Important Note
We can't sacrifice 100% of your income - by law, you must receive at least your National Minimum Wage Salary and Holiday Pay (shown on your payslips as Basic Rate and Holiday Pay).
We can't monitor your allowance - that's between you and your financial adviser.
Before you decide
Essential steps:
- Check with your pension adviser - they'll calculate your personal allowance
- Ask about carry forward - you might be able to contribute more
- Remember, there are certain rules about changing values of salary sacrifice mid-employment - you can read more about that here.
Pension allowances can be complex - always get professional advice to make sure you're maximising your contributions without tax penalties!