Contributing to your pension pot reduces your taxable income and can give you back some or all of your £12,500 personal allowance (2020/21 figure). This allowance is progressively withdrawn once your earnings exceed £100,000. You lose £1 of the allowance for each £2 you earn above £100,000, meaning that the whole personal allowance is wiped out when earnings reach £125,000.

If you’re a higher rate taxpayer with a taxable income of between £100,000 and £125,000, a pension contribution that reduces your taxable income to £100,000 would give an effective rate of tax relief of 60%. For those on higher incomes, or making bigger contributions, the effective rate would be between 40% and 60%.

Pensions and tax can be complex, so it’s a good idea to get some financial advice to find out what’s best for your circumstances.