Putting money in

Making contributions into your workplace pension

Whatever your goals, it’s crucial to start saving for your retirement. Putting aside money isn’t always easy but it’s essential to achieving financial security for your future.

Putting money into your workplace pension is one way to do this. If you're part of your workplace scheme, your employer will already be making contributions on your behalf. But making additional payments yourself, if you can, can also be helpful. 

What’s more, you’ll get tax relief on what you put in. This effectively reduces how much income tax you pay and boosts what goes into your pension.

There are two ways your employer may offer to help you make employee contributions to your workplace pension:

Your employer deducts your contributions from your pay before it’s taxed and paid out to you – so you only pay tax on what you earn after your pension contribution has been deducted. 

This means you get full tax relief at your highest ‘marginal’ rate of income tax (the income tax bracket you’d fall in if the contribution had been paid to you as salary). If you don’t pay UK income tax - for example, if your earnings are below the current personal allowance – your contributions can still be deducted before salary is paid out to you.

Your employer might offer a salary sacrifice arrangement (sometimes called salary exchange). Here, you agree to sacrifice part of your salary and your employer agrees to pay an equivalent amount into your pension as an employer contribution. 

Salary sacrifice can also reduce your National Insurance payments, boosting your take-home pay. Again, this means you get full tax relief at your highest ‘marginal’ rate of income tax, unless you’re a non-taxpayer.

Here, your employer deducts your contributions from your pay after it’s taxed (see your plan information for more details). Your pension scheme will then automatically add basic-rate tax relief to your pension when you pay your contribution. If you pay higher or additional-rate income tax, you can reclaim further tax relief through your annual self-assessment tax return.

If you’re a non-taxpayer you can still get basic-rate tax relief on your contributions up to a certain level(Opens new window).

Note - this is only relevant to personal pensions. 

The maximum you can put in

Because pension contributions attract valuable tax relief there are limits on how much you can put in:

The annual allowance - the amount of pension contributions you can make each year that will receive tax relief. It's based on your earnings for the year. There will normally be a tax charge to pay if you contribute more than this amount. 

A reduced annual allowance of £4,000 will apply to money purchase pension contributions if you've flexibly accessed pension benefits. 

Find out more information on the annual allowance(Opens new window) limits and when the reduced limit applies.

The money purchase annual allowance – if you’re 55 or over and are flexibly accessing benefits from a pension, you're subject to a money purchase annual allowance (MPAA) that limits the future contributions you can make to your pension. See what the current money purchase annual allowance(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window).

Tapered annual allowance - restricts pensions tax relief by introducing a tapered reduction in the amount of the annual allowance for individuals with income (including the value of any pension contributions) of over £150,000 and who have an income (excluding pension contributions) in excess of £110,000. See if the tapered annual allowance affects you(Opens new window)(Opens new window)(Opens new window)(Opens new window).