Maximising Your Pension Contributions: Essential Guide for Tax Year 2024-25

Optimising your pension contributions is one of the most tax-efficient ways to save for retirement. Making the most of available pension contribution allowances can significantly reduce your current tax liability while building your future financial security.

Understanding the rules around pension contributions is essential for effective tax planning.

Annual Pension Contribution Limits

You may contribute up to £60,000 (gross) in the 2024-25 tax year into a pension fund. This includes any employer pension contributions made on your behalf.

Additionally, you may benefit from carrying forward any unused pension annual allowances from the three previous tax years.

High-Income Restrictions

If your taxable income exceeds £260,000, your annual pension allowance will begin to be reduced. This is subject to a restricted minimum of £10,000.

It’s worth calculating your available pension allowances if this applies to you. Exceeding the permitted limit may result in the excess being taxable at 45%.

Considerations for Those Already Drawing Pensions

For those who have already begun drawing their pension (including flexi-drawdown), the annual pension allowance is reduced to only £10,000 (gross).

Lifetime Allowance Changes

There is no lifetime allowance as this was abolished from 6th April 2024. However, during the 2024 Autumn Budget, the Chancellor announced that unused pension savings will have to be included in the death estate. This means they potentially become subject to Inheritance Tax.

This represents a significant change that could affect estate planning for many individuals.

How We Can Help with Pension Contributions

At Lewis Brownlee, our pension planning experts can help you:

• Calculate your maximum available pension contributions allowance
• Utilise carry forward provisions effectively
• Structure contributions to maximise tax relief
• Understand how recent changes to pension rules affect your retirement planning
• Integrate pension planning with your wider tax and estate planning

Contact us today to ensure you’re making the most of your pension contributions before the tax year ends.