Tax relief

This is one of the best benefits of a workplace pension. Your pension pot isn’t just built up with money from yourself and your employer – the government helps too. You get tax relief on the earnings you put into your pension pot – so the tax you’d normally pay goes into your pension savings instead.

It’s all down to an annual allowance of how much money you can add into your pension pot and still get tax relief on.

The standard limit is £40,000, but your exact annual allowance will depend on how much you earn. For example, if you earn £30,000, you could pay in £24,000 and get £6,000 in tax relief. Most people probably won’t pay 80% of their earnings into their pension pot though!

The limit also depends on whether you’ve taken any money out of your pension savings already.

It depends which of the two methods your employer uses for getting tax relief for you.

  • Net pay arrangement takes your pension contributions from your pay before your wages are taxed.
  • Relief at source takes your pension contributions after they’re taxed.

Check our webpage about tax relief »