SJP Pension contributions
Planning for retirement means understanding how pensions work - and how to make the most of them. This page explains who can contribute to a pension, how much you’re allowed to pay in each year, and what happens if you want to contribute more than the annual allowance.
Who can contribute to my pension?
If you have a workplace pension, both you and your employer usually pay in each month. Your contributions will benefit from income tax relief.
If you have a personal pension (one you set up yourself), you make the payments and the government will add tax relief to your contributions.
These pension contributions are completely separate from the State Pension, which is based on how much National Insurance you’ve paid over your working life. You can claim your State Pension from age 67 (from 2028, currently 66, set to rise to 68) and you’ll need 35 years’ qualifying NI contributions to benefit from the Full State Pension – check if you’re eligible on the government’s website GOV.UK.
How much can I contribute to my pension?
There’s no limit on how much you can contribute to your pension but there are limits on how much you can pay in and still be eligible for tax relief.
In the tax year 2025/26, the standard pension annual allowance is £60,000 per year.
This means that you, your employer and anyone else who might contribute to your personal pension (like a member of the family) can pay in a substantial amount of money each year.
The maximum amount you can personally contribute and receive tax relief on each tax year is £3,600 or 100% of your relevant UK earnings, whichever is higher. This means that someone who is not earning can still save money into a pension pot and benefit from tax relief, up to the £3,600 threshold.
Your pension annual allowance also covers your Defined Benefit pension (if you have one), sometimes called a final salary pension. If you have this sort of pension, your allowance is calculated differently, based on increases in the capital value of the retirement benefits.
Why contribute to a pension?
- The government will boost any of your pension contributions up to the annual allowance through tax relief.
- Your employer will usually contribute extra money to your pension. Some may match your contributions too.
- You can withdraw up to 25% of your pension tax free.
- Pension contributions can help you regulate your taxable income while you’re still working through salary sacrifice.
- The State Pension on its own almost certainly won’t be enough to guarantee a comfortable retirement lifestyle.
There are excellent practical reasons why you should save into a pension. But a key reason is peace of mind – knowing that you’ve saved enough to see you comfortably through retirement.
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 may be able to Carry Forward any unused allowance from the previous 3 years.
To do this, you must have been a member of a Registered Pension Scheme in that tax year.
You’ll need to use up your current year’s allowance first, but Carry Forward can give you flexibility if your income varies from year to year or you’re self-employed. Although if you do not have the allowance a tax charge may be incurred as explained below.
Can I increase my pension allowance using Carry Forward?
Carry forward can be a really useful way to catch up on your pension contributions, especially if you’re self-employed and have a fluctuating cash flow, or you received a one-off lump sum such as a bonus or an inheritance in a particular year.
But speak to your financial adviser if you think you might exceed your annual allowance. Any excess contribution will be taxed in such a way that it could cancel out the tax relief you would have received on the excess amount.
The liability for this falls on the individual, which means that you must declare any excess through your self-assessment tax return.
What happens if I stop contributing to my pension?
When the going gets tough, it can be tempting to pause your pension contributions to ease a short-term cash flow crunch. But that will affect the amount of money you’ll have in retirement, and the extra income you’d have earned through compound interest.
It is possible – and advisable – to catch up as soon as you can by contributing a little more each month when you restart your pension contributions.
By the time we reach 55, many of us begin to prioritise pension planning, and this question often tops our minds. With inflation rates still see-sawing, and interest rates falling, the cost of a comfortable retirement may well keep rising.
Are you on track to being able to enjoy the retirement you’re looking forward to? Or is there a gap between your savings and the income you’d ideally like? Use our calculator to find out how much you may need to save.
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 2025/26. 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.
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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