The money you save into most workplace pensions has already been taxed (pesky income tax!). But the government has a deal which means your pension provider can claim back the money you’ve paid in income tax if it goes straight into your pension. So instead of that money disappearing in a tax bill, it gets put in your pension for future you! 🏝
Here’s the maths part– pension providers will claim back at the basic income tax rate (20%), which actually means that whatever you save into your pension gets a 25% top up. For example, if you save £100 into your pension, the government adds £25. 🤑
You can get tax relief on private pension contributions worth up to 100% of your annual earnings. Contributions per year are capped at 100% of your annual earnings or £40,000, whichever is lower.* Non-taxpayers can make pension contributions of up to £2,880 a year and still receive standard tax relief.
There aren’t many places you can put money to get a boost like that. It’s all part of a big government plan to encourage people to save for retirement – and frankly, it’s pretty great.
Winner winner 🐔 🍽
*If you earn above £260,000/year your allowance may be lower.
With investment, your capital is at risk. Taxation depends on individual circumstances. Tax rules may change.