Pension allowance

[Wheretheskyisblue]

Does anyone know what the maximum is you can pay into a pension a year? I only work part time and don't earn much but have lots of savings so would like to put some into my pension. I understand the limit is my annual salary but is it the pre tax amount? Also if I am doing salary sacrifice for childcare vouchers is the limit the amount before or after these have been taken off?

The limit is your annual salary pre tax. I don’t know if that’s your salary before or after childcare vouchers - I think it might depend on the pension scheme so I suggest you check with them.

But I’m commenting because there’s a thing to watch out for when you are trying to max out your pension contributions on a low income.

When you pay money into your pension, the pension provider claims what’s called ‘tax relief’ which adds 25% to your contribution. It’s a misleading name because you still get it even if you’re not earning enough to pay any income tax.

So for example of you earn £10,000 before tax (so you wouldn’t pay tax anyway) and you want to pay £10,000 into your pension, you can only pay in £8,000. The pension scheme claims another £2,000 (25%) which brings the total pension contribution to its maximum, ie £10,000.

There’s a calculator here to show how much you can pay in depending on your income: www.hl.co.uk/pensions/tax-relief/calculator

Thanks Hazelnut, I did not realise that and the calculator is really helpful.

I think I can use the last 3 years of unused allowance too though, it does not mention this on the HL website?

If anyone knows how the allowance works out with childcare vouchers or other salary sacrifice arrangements I would be really grateful. Otherwise I will try contacting my provider.

The maximum is £40k pa ..and you can use unused allowance going back 3 years I think . However, you can’t put in more than you earn.

www.gov.uk/tax-on-your-private-pension/annual-allowance

You can only backdate 3 years if you were a member of a pension scheme for 3 years.
Your maximum pension contributions are restricted to your salary and the tax reclaimed. ( subject to a max annual limit
Including your employers contributions) You can also pay into a pension and claim the tax if you have no income at all Just under £4000 pa I think, but need to check.