How to get the most out of pension tax advantages
By Cristian Angeloni, 3 Feb 22
Personal finance experts share 10 tips savers should be aware of
“Savers who are able to lock away their money until the minimum pension access age – currently 55 – need to seriously consider the fiscal advantages detailed above. But there are ceilings on what can be saved tax-free,” Lowery said.
“For most people the total sum of personal contributions, employer contributions and government tax relief received can’t exceed the annual personal allowance of £40,000 (2021/22). More rigid and complicated rules apply for the very highest earners under a tapering allowance that can reduce the annual allowance to as little as £10,000.
Higham added: “And you can’t contribute more than 100% of your earnings to a pension during the tax year, so if your salary is lower than £40,000 then you are limited to contributing your annual earnings into pensions.
“Meanwhile the Lifetime Allowance (LTA) is the limit on how much you can build up in pension benefits over your lifetime while still enjoying the full tax benefits. Exceeding the standard LTA of £1,073,100 – as of 2021/22 and frozen at that level until 2025/26 – will lead to additional tax charges on the excess when you come to take your pension benefits or turn 75.”
Tags: Pension
