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Can I still contribute to a pension after retirement?

We look at the reasons why you should consider paying into your pension even if you’ve already taken money out.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Many people don’t realise that they can continue paying into their pension, even if they’ve given up work or dipped into their retirement savings already. If you thought the same, you could be missing a trick.

Providing you’re a UK resident, under 75, you can still save into your pension and get tax relief. This is an added boost to your pension savings from the government that could mean a more comfortable retirement.

We hope you find the following tips helpful, but this article isn’t personal advice. Investments rise and fall in value, so you could get back less than you invest. If you’re not sure what’s right for your situation, please seek advice. Once money is paid into a pension you won’t usually be able to access it again until you’re at least 55 (57 from 2028).

What are the tax benefits?

  • When you pay money into your personal pension, the government will automatically add basic rate tax relief (currently 20%)
  • If you pay income tax at 40% or 45% you can claim back even more through your tax return
  • Usually up to 25% of the money you have in a pension can be paid to you tax free and the rest is taxed as income
  • You can pass on your pension to your loved ones (tax free in some cases) when you die. It won’t normally be subject to inheritance tax

Scottish taxpayers pay different rates of tax so the amount they can claim back is different. Pension and tax rules can change, and the value of any benefits will depend on your circumstances.

Want to learn more about tax relief? Download our tax relief guide

How much can I pay into my pension?

It all depends on how much you’re earning and whether you’ve already taken money from a pension.

Get a boost if you’re not working, or on a low income

If you’re earning less than £3,600, or you’re a non-earner, you might be surprised to learn that you can still pay in up to £2,880 each tax year and the government will automatically add up to £720 (20% tax relief) on top.

It might not sound a lot but it all adds up. Let’s say you start saving the full amount when you’re 60. You’d have an extra £10,800 from the government by your 75th birthday.

That’s essentially free money, which you can access yourself or even pass on to your loved ones.

Still working and flexibly accessed a pension

To benefit from tax relief you can still only pay in as much as you earn, but if you’ve flexibly accessed a pension, which includes taking a lump sum payment (UFPLS) or taxable income from most Flexible Drawdown arrangements, you will have triggered what’s known as the Money Purchase Annual Allowance (MPAA). This means you and your employer are restricted to paying in up to £4,000 a year in total (including tax relief) to money purchase pensions (like the HL SIPP).

If your pension contributions (including any tax relief) go over the MPAA, any excess will be added to your income and taxed at your highest rate. This charge should be declared and paid through your income tax self-assessment.

Still working and haven’t flexibly accessed a pension

If you’ve accessed your pension, but only taken your tax-free cash or bought an annuity, you won’t have triggered the MPAA (explained above). This means you’ll be able to squirrel away as much as you earn and receive tax relief, subject to the annual allowance which is £40,000 for most people.

For example, say you earn £30,000 a year and you want to make the most of your allowance, you would only actually need to pay £24,000 into your pension. The government would then add £6,000 in basic rate tax relief, bringing your total contribution up to match your earnings.

Those who pay tax at a higher rate could claim back even more tax relief through their tax return. This effectively reduces the initial cost of the contribution.

To find out how little a pension payment could really cost you, try our pension tax relief calculator.

Pension tax relief calculator

Watch out for the tax-free cash recycling rule

If you’ve taken money from your pension already, and you want to add more money in, you should double-check our factsheet to make sure you won’t breach the tax-free cash recycling rules. These rules aim to stop people exploiting pension tax relief benefits and could apply if you significantly increase your contributions before or after taking tax-free cash.



Add money to your HL SIPP this tax year

The deadline to add money to a pension in the current tax year is 5 April 2021. Just remember, once money is paid into a pension you won’t usually be able to access it again until you’re at least 55 (57 from 2028).

If you already have an HL Self-Invested Personal Pension (SIPP), the quickest way to make a payment is online – you just need to log into your account. Please make sure you re-read the SIPP Key Features before proceeding.

Top up your HL SIPP

Open a new pension this tax year

With the HL Self-Invested Personal Pension (SIPP) you're able to choose your own investments, track how they're doing online at any time, and make changes whenever you like. You’ll also have access to all the pension freedoms, when you want to take money out.

The deadline to add money to a pension in the current tax year is 5 April 2021. Just remember, once money is paid into a pension you won’t usually be able to access it again until you’re at least 55 (57 from 2028).

If you’re still working, we’d recommend making the most of any matched employer contributions before paying into another pension.

More about the HL SIPP

What did you think of this article?


Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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