Maximising pension contributions in 2025: what you need to know this January.

You can maximise your private pension by making extra contributions to it. You can do this at any time, but it may be more relevant to consider this in the run up to the tax year end.

Top up your pension

Topping up your pension in 2025 can result in a higher income when you retire and there are several reasons why you might want to make a large one-off contribution.

Boost your pension savings

Boost your pension savings with tax relief as contributions benefit from 20% (more if you’re a higher-rate taxpayer). This means every pound in your pension only costs you 80p in contributions.

Important in this regard is whether you have fully utilised your annual allowance.

Utilise your annual allowance

Everyone has an allowance which is the maximum payable into pensions in any given tax year (currently £60,000) while receiving tax relief.

Any unused allowance from the previous three tax years can be ‘rolled over’ to the current year, although you can’t contribute more than your total pay in any given tax year.

For example, if you were paying in just £30,000 a year of your allowance over the past three years, then this year, you’d be able to make a lump sum payment of up to £110,000 and still be under the annual allowance (provided you earn £110,000 in the current tax year).

                       Annual Allowance        Gross Contribution
2021/22       £40,000                        £30,000
2022/23      £40,000                        £30,000
2023/24      £60,000                        £30,000
2024/25      £60,000                        £110,000

If you anticipate receiving a bonus, maybe you can increase its value. You may achieve this by requesting an employer pension contribution instead.

An employer pension contribution saves on both employee and employer National Insurance contributions, meaning you could receive more money that you would have as a cash bonus.

This would also reduce your overall taxable income for the year.

Make additional payments

You can make additional payments into your pension at any time. Just remember that you can’t access your pension until you’re 55 (at the earliest), so don’t pay in any savings that you may need before then.

Currently, once you reach 55, you can transfer savings into your pension knowing that you can access them again if you need to. This age increases to 57 on 6th April 2028.

However, you should talk to a financial adviser first to ensure you are making the best decision.

Although every effort has been made to ensure that the information provided in this article is accurate and correct, the information provided does not constitute any form of financial advice. We recommend that you take financial advice before making any financial decisions.