Pension alert: ‘Cheaper’ way to save for retirement before tax deadline | Personal Finance | Finance

The last day of the tax year, April 5, is less than a month away, but there’s still plenty that can be done to boost pension pots before then. Jenny Holt, Managing Director of Customer Savings & Investments at Standard Life, shared some useful tips to help savers make the most of their pension before the deadline.

Top up contributions with pension tax relief

Britons could benefit from added tax relief on their pension contributions, helping to boost their pot.

Ms Holt explained: “Tax relief makes your pension plan one of the most tax-efficient ways to save for your retirement. Your contributions get topped up by the Government, effectively making it cheaper to save more into your pension plan.

“Not all pension schemes provide tax relief in the same way, but most UK taxpayers get tax relief on their pension payments based on the rate of income tax they pay.

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The limit is currently £40,000 or 100 percent of someone’s earnings in a tax year, whichever is lower, although it could be less for higher earners, non-earners or those who have already started taking money from their pension savings.

Ms Holt said: “Once the new tax year starts, your annual allowance will renew. So it makes sense to consider paying more into your pension plan before then to make the most of this year’s allowance.

“Even if you’ve already used all of your annual allowance for the 2021/22 tax year then you might still have the option to save more.

“If the £40,000 annual allowance limit applies to you and your circumstances allow, you can usually carry forward any unused allowances from the last three tax years, so it’s worth double checking.”

Get Child Benefit back by paying more into a pension plan

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.

However, there may be a way people could get some or all of it back if their earnings are in this range.

Ms Holt said Child Benefit can be worth around £2,500 a year to a three-child family, a potentially significant amount.

She explained: “Contributing to your pension plan reduces what counts as your income. And could allow you to keep your Child Benefit and boost your pension savings at the same time.

“Use the Government’s Child Benefit tax calculator to work out if you’re affected by the tax and how. You can choose not to take Child Benefit payments if your earnings are over £60,000, but you should still consider filling in the Child Benefit claim form.

“This helps you get National Insurance credits, which go towards your state pension later in life.”