Tax Allowances


Saving into a pension comes with a number of tax advantages:


  • Your contributions are made before income tax, which saves you 20% on the cost of your pension if you are a basic-rate tax payer (and more if you are a higher-rate tax payer)
  • Investment growth is partially free of tax
  • Lump sum payments on death are usually free of inheritance tax
  • On retirement, you can take up to a quarter of your entitlement as tax-free cash
  • You can also reduce the National Insurance you pay via salary sacrifice


HMRC has two main restrictions that apply to pension tax relief:



More information can be found on HMRC's website or on the Money Advice Service website.


Pension tax is complex and if you are unsure about how this may affect your pension, you are encouraged to seek independant financial advice.