Are there limits on the amount I can save into my Collegia pension?
You might not know that there is not a hard limit on your pension contributions, you can add as much as you like in your pot. However, there is a cap on how much tax relief you can get on your contributions.
Every time you pay into your pension, you'll receive a 25% tax bonus on your contribution from the government. The government offers this bonus to encourage you to save for your future. However, there's a limit on how much you can get back.
The "Annual Allowance" is the maximum pension contribution limit that puts a ceiling on how much tax relief you can benefit from. Right now you can get tax relief on pension contributions up to £60,000 or 100% of your earned income each tax year, whichever is lower. This applies across all your pensions and includes:
* Contributions by you
* Contributions by your employer
* Contributions from someone else made on your behalf
* Tax relief added to your pot
For example, if you earned £30,000 a year, you can pay £24,000 into your pension each year. You'll then receive the government's 25% tax relief contribution of £6,000, making the total amount in your pot £30,000.
If your income is £60,000 or higher, then £48,000 is the maximum amount you’re allowed to contribute into your pension each year - as you'll also be receiving a £12,000 tax top-up.
If your pension contributions add up to more than this across the year, then you'll need to pay tax on the amount you’ve gone over. Essentially, you'll have to give back any tax relief you received on the excess amount. This is known as the Annual Allowance Charge.
If you aren’t employed or earn under £3,600 annually then the most you can pay into a pension is £2,880 (or £3,600 with the tax relief applied).
If you earn over £240,000 a year, you'll fall into the tapered annual allowance. For every £2 you earn above £240,000 each year, you’ll lose £1 from your annual pension allowance - up to a maximum of £36,000.
This means that anyone earning over £312,000 will have an annual allowance of just £4,000.
Please note that Collegia does not offer tax advice, so if you are not sure about your circumstances get in touch with an IFA.
Every time you pay into your pension, you'll receive a 25% tax bonus on your contribution from the government. The government offers this bonus to encourage you to save for your future. However, there's a limit on how much you can get back.
The "Annual Allowance" is the maximum pension contribution limit that puts a ceiling on how much tax relief you can benefit from. Right now you can get tax relief on pension contributions up to £60,000 or 100% of your earned income each tax year, whichever is lower. This applies across all your pensions and includes:
* Contributions by you
* Contributions by your employer
* Contributions from someone else made on your behalf
* Tax relief added to your pot
For example, if you earned £30,000 a year, you can pay £24,000 into your pension each year. You'll then receive the government's 25% tax relief contribution of £6,000, making the total amount in your pot £30,000.
If your income is £60,000 or higher, then £48,000 is the maximum amount you’re allowed to contribute into your pension each year - as you'll also be receiving a £12,000 tax top-up.
If your pension contributions add up to more than this across the year, then you'll need to pay tax on the amount you’ve gone over. Essentially, you'll have to give back any tax relief you received on the excess amount. This is known as the Annual Allowance Charge.
If you aren’t employed or earn under £3,600 annually then the most you can pay into a pension is £2,880 (or £3,600 with the tax relief applied).
If you earn over £240,000 a year, you'll fall into the tapered annual allowance. For every £2 you earn above £240,000 each year, you’ll lose £1 from your annual pension allowance - up to a maximum of £36,000.
This means that anyone earning over £312,000 will have an annual allowance of just £4,000.
Please note that Collegia does not offer tax advice, so if you are not sure about your circumstances get in touch with an IFA.
Updated on: 16/04/2024
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