Pension Contributions

Making personal contributions is tax efficient. There is no longer a cap on lifetime contributions, and clients whose pension pot had reached £1,073 million before the addition of the lifetime allowance are now able to make further tax relieved contributions. However, the maximum lump sum is capped at £268,275.

Where the pension pot exceeds £1,073million, clients should weigh up the tax relief on contributions against the tax that they expect to pay on withdrawals. For example, if a client is able to secure tax relief of 45% on a contribution but expects to pay tax at the basic rate on pension withdrawals, making the contributions is worthwhile.

For 2025/26, the annual allowance is set at £60,000. However, where threshold income exceeds £200,000 and adjusted net income exceeds £260,000, the annual allowance is reduced by £1 for every £2 by which adjusted net income exceeds £260,000 until the allowance is reduced to £10,000. This means once adjusted net income reaches £320,000 and threshold income is at least £200,000, the annual allowance is £10,000.