How to end up with £190,000 more in your pension by 5th April


Julie Hutchison

12th March 2015 at 11:50am

Pensions are changing, becoming much more flexible and with attractive new inheritance features starting on 6th April, so you may want to know how to make the most of your tax allowances to get a head start on your saving. And if you earn a high income, or are a business owner for example, you could be well placed to increase the value of your pension before the tax year ends on 5th April.

There is an element of ‘use it or lose it’ when it comes to the maximum you’re allowed to pay into your pension each year.There is an element of ‘use it or lose it’ when it comes to the maximum you’re allowed to pay into your pension each year.

The starting point is that there are two things which limit what you can pay into your pension. The first is the annual allowance : £40,000 for the tax year 2014/15. The second is that you need to have ‘relevant earnings’ to cover what you pay into your pension, in other words salary or self-employment income. (Employer contributions aren’t restricted to your earnings).

But if you or your employer hasn’t paid into your pension for the last few years, and you’ve been a member of a UK pension scheme over that period, pension carry forward rules allow any unused annual allowance from the previous three tax years to roll forward. This means the maximum pension contribution before 6th April 2015 could be as high as £190,000.

Let’s look at an example.

Tax year

Annual allowance

Gross amount paid in

















Total allowance available : £190,000


And with the usual way the tax relief top-up from the government works, this would involve you paying in £152,000 which then gets boosted up to £190,000 with 20% tax relief.

Things to keep in mind

  • You would need ‘relevant earnings’ of at least £190,000 to make this as a personal contribution. So if your salary is £50,000, you can’t dip your savings and investments to make up the difference – that won’t work! You need to have salary or self-employment income of £190,000 in the current tax year, in this example.
  • As employer contributions aren’t restricted to your earnings, these could potentially be used to make up the difference.
  • This example assumes no pension contributions were made by you or your employer in the last 4 tax years, and that you were not an active member of any defined benefit schemes. If you or your employer have paid into your pension, this would reduce the £190,000 figure in this example.
  • If you are a higher or additional rate taxpayer you may be able to claim more tax relief. The amount of higher rate tax relief available to you will depend on the amount of higher rate tax you pay; generally the more you earn (and the more higher/additional rate tax you pay), the more tax relief you will be able to claim.
  • Importantly, the pension contributions you make are checked against the annual allowance for the tax year in which your pension scheme’s pension input period (PIP) ends. For some schemes, your PIP may already end in 2015/16 – so check with your pension provider, as this will reduce the £190,000 used in the above example to £180,000. This is a complex area so do speak to an expert to get help.

Don’t sleepwalk into an unexpected tax bill

If you get the calculations wrong with the pension carry forward rules, you could be due to pay an annual allowance tax charge, which could be as much as 45%. That’s why I’d recommend you speak to an expert before taking steps to make a big payment into your pension, to help you stay on track. But with tax relief still available at up to 45% in the current tax year, this could give your finances a significant boost.

This blog and any responses to comments are not financial advice. A pension is an investment. Its value can go up or down and it may be worth less than you paid in. Paying a large contribution into your pension may or may not suit your personal circumstances and this blog is an illustration only. Law and tax rules can change in the future and this blog reflects our understanding at 6th March 2015.

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