SJP Pension allowances
Paying into a pension is a smart way to invest in your future and can help you achieve a comfortable retirement.
There is no limit on how much you can pay into your pension each year, however there is a limit of the total amount of contributions you can pay into your pension and claim tax relief, this is set by your ‘Annual Allowance’.
The pension allowance 2024/25
In the tax year (2024/25), the standard Annual Allowance is £60,000 per year.
This covers the amount that you can pay into your defined contribution pensions and receive tax relief, including your contributions, your employer’s, and anyone else who might pay in on your behalf.
The maximum amount you can personally contribute and receive tax relief on is restricted to the higher of £3,600 and 100% of your relevant UK earnings.
The Annual Allowance also covers your defined benefit pension (if you have one), and is calculated differently, based on increases in the capital value of the retirement benefits.
Annual Allowance
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
What if you want to pay more into your pension than your Annual Allowance?
If you wish to pay in more than your current Annual Allowance and still benefit from tax relief, you can ‘Carry Forward’ any unused allowance from the previous 3 years.
You must have been a member of a Registered Pension Scheme in the tax year you wish to carry forward unused Annual Allowance.
You will need to use up your current year’s allowance first, but this could be useful if your earnings vary from year to year, or if you are self-employed for example.
Be careful if you think you are going to exceed your Annual Allowance. Any excess contribution will be taxed in such a way as to effectively cancel out the tax relief you would have received on the excess amount.
The liability for this falls to the individual, which means that you must declare it through your self-assessment tax return.
Increase your pension allowance using Carry Forward
‘Carry Forward’ is a way that you can use up any remaining unused Annual Allowance for the previous three tax years.
Including the current tax year allowance means that you can potentially pay up to £200,000 into your pensions.
Carry Forward can be a really useful way to catch up on your pension contributions, especially if you are self-employed, or perhaps received a bonus, or inheritance in a particular year.
The rules can become more complex depending on your earnings, so it’s best to seek advice.
Frequently asked questions
There are a few different ways to do this. If you are employed, and you pay into a workplace pension, then you might find this information on your monthly payslip. This will show how much you are paying in, and possibly how much your employer pays in as well.
Another way is to look at your pension itself; many pension providers offer online access to your details, and from there you can see total contributions going into your pension. It’s a good idea to set this up as you will also be able to see how your money is invested.
If you are self-employed, you may be paying via a direct debit, or possibly with the help of your financial adviser or accountant, who can provide details of contributions. As mentioned above, it is worth registering online with the pension provider, as this is a quick way to see your contributions and how much your pension is worth currently, and whether it is on track.
Most pension providers offer the option to change your pension contributions. Either contact your financial adviser, pension provider, or your employer if it is a workplace scheme, and they will be able to help alter your contributions.
There is no limit to what you can pay into your pension, however the Annual Allowance is set at £60,000 for 2024/25. This is the limit by which you can contribute and receive tax relief. If you contribute beyond this, you could potentially be taxed. The rules around this can be complex, and it’s best to speak to an adviser if you are unsure.
If you contribute more than the Annual Allowance, your excess contribution will be subject to a tax charge.
It is worth noting that you are able to ‘Carry Forward’ up to three years of unused Annual Allowance. So, if you are in a position to contribute beyond your Annual Allowance for the current tax year, speak to your financial adviser who can help to calculate any unused allowance you may have.
You may be notified by HMRC, as any tax charge is added to your taxable income for the current tax year. That said, the responsibility remains with you to declare this via your self-assessment form. To be certain, it is best practice to liaise with your financial adviser, so you are able to take appropriate action in time.
This can vary between pension providers. It is usually best to speak to your financial adviser, the pension company, or your employer to see what your options are.
There are a few ways to do this, but generally if you are employed and part of your company’s workplace pension scheme, it will be a percentage of your annual salary, usually paid monthly. The percentage will vary depending on the rules in place through your employer; for example if you have been there a certain length of time, or your earnings go above a certain level. Often your employer will contribute in addition.
If you are self employed, you will likely need to speak to your financial adviser or accountant who can help look at your contribution levels depending on the amount that you are paid through your business.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time Tax relief is dependent on individual circumstances.
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