Why should I think 'pension' before tax year end?

The last day of the tax year is 5 April, and there’s still lots you can do to make the most of your pension plan before then. Here we outline four ways to help you give your pension plan a boost before the tax year is up.

1. Use your pension annual allowance

The limit is currently £60,000, but it could be less if you’re a higher rate taxpayer, non-earner or if you’ve already started taking money from your pension. If you can, it makes sense to consider paying more into your pension before then, to make the most of your allowance. Your pension is one of the most tax-efficient ways to save for your retirement, as your payments into your plan get topped up by the government, effectively making it cheaper to save more.  If you’ve already used all of your annual allowance for the 2023/24 tax year, you might still have options. If the annual allowance limit applies to you and your circumstances allow for it, you can usually carry forward any unused allowances from the last three tax years.

2. Take advantage of your workplace pension plan

Workplace pension plans are a great way to save more for your future because your employer normally has to pay in too. At least 8% of your qualifying earnings will be paid in, and a minimum of 3% of that will come from your employer. Some employers will even match the percentage you’re paying into your plan up to a certain amount. So it’s worth checking to see if upping your own payments could mean your employer will pay in more too.

3. Consider bonus sacrifice

If you get a work bonus, you might have the option to put some or all of it into your pension. Doing this could save on tax and National Insurance contributions, meaning you get to keep more of your bonus in the long run. And it could be a good way to make the most of your current pension annual allowance before 5 April.

4. Get your child benefit back by paying more into your pension plan

Worth a little over £2,600 a year to a three-child family, child benefit is reduced by the High Income Child Benefit Charge when one parent’s income reaches £50,000. At £60,000, the tax charge cancels out the benefit entirely. But there is a way you could get some or all of it back if your earnings are in this range. Paying into your pension plan reduces what counts as your income and it could allow you to keep your child benefit and boost your pension savings at the same time.

Contact Dentons Wealth to schedule a consultation and discover how we can support you in optimising your tax efficiency and achieving your financial goals.

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.