The government encourages you to save for your retirement by giving you tax relief on the contributions you pay into a pension scheme. When you pay into the pension scheme you receive tax relief on your contributions at the time they are deducted from your pay.
HM Revenue and Customs rules govern:
- the total amount of contributions you can make into all pension arrangements and receive tax relief
- the pension savings you can have before you become subject to a tax charge.
Although there is no overall limit on the amount of contributions you can pay to all schemes, tax relief is only given on contributions up to the sum of 100% of your taxable earnings in a tax year (or £3,600 if greater).
There are 2 main allowances for pension savings:
- a Lifetime Allowance and
- an Annual Allowance.
The lifetime allowance and the annual allowance cover any pension benefits you may have in all tax registered pension arrangements, not just this scheme, but excluding the State pension.
Most people will be able to save as much as they wish with full tax relief as their pension savings will be less than the allowances.
Further information can be found on the HMRC website.