Making the most of your annual pension contributions

For the tax year 2023/24 the annual allowance for pension contributions was increased from £40,000 to £60,000 meaning you can potentially make much larger contributions towards your pension in a tax efficient manner. This includes any payments made by yourself or your employer.

However, if you’re a higher earner, your annual allowance would be tapered, where the amount you are able to save into your pension plan would gradually reduce each year depending on how much you earn.

The annual allowance is reduced for those who have adjusted income over £260,000 a year and it reduces by £1 for every £2 over £260,000.

There is also the possibility of carrying forward any unused pension allowances from the previous three tax years, this could potentially add up to a large sum of money that you are able to add to your pension tax free, which is something certainly worth looking into.

Another major change for the new tax year was the removal of the lifetime allowance, previously the most you could build up in pension savings in your lifetime without facing any tax charges when you take them out was £1,073,100.

This could be great news if you have already been affected by the allowance or are getting close to the limit, as you could look to top up your pensions savings without worrying about paying any extra tax.

Do you think you’re making the most of your pension contributions? It is more important than ever to ensure you are making the right decisions for your future. Get in touch with a member of our financial planning team to find out more.