2. Harness the benefits of tax relief
Pension tax relief is intended to help you save for your retirement with money that would otherwise go to HMRC. This doesn’t mean you won’t have to pay income tax on your savings in the future, simply that you don’t have to pay income tax on it now, subject to limits and allowances set by HMRC.
With your own contributions, there are different ways that tax relief might be handled depending on the type of pension you have. But when it comes to your employer contributions, then generally no tax or national insurance is deducted.
For example, if you earn £2,000 a month and your employer’s contributions to your pension are 5%, the full £100 will go straight into your pension.
Remember, tax treatment depends on individual circumstances and pension and tax rules may change in the future.
Learn more about how pension tax relief works.
3. Maximise your contributions
When saving into a workplace pension, your employer will pay in too. If you want to boost your savings, there are a couple of small steps you can take:
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Make the most of your employer contributions: You don’t have to stay with the minimum contribution level and you may find that if you put more in, your employer might match those contributions up to a set amount – giving your savings an even bigger boost.
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Make additional voluntary contributions: You can pay extra into your pension and get tax relief on the money all the way up to the annual allowance. Depending on how much you earn, this is typically £60,000 a year but for some, it could be as low as £10,000. Find out more about pension allowances.
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Make use of salary sacrifice contributions: You can choose to reduce your salary in exchange for a pension contribution made by your employer. This option means you could save on National Insurance contributions as well as Income Tax as you are not taxed on these contributions.
