Pension premiums

There is no limit on the amount that may be contributed to a registered pension scheme. The maximum amount on which an individual can claim tax relief in any tax year is the greater of the individual's UK relevant earnings or £3,600.

If total pension input exceeds the annual allowance of £255,000 there is a tax charge at 40% on the excess. This limit does not apply in the year that full pension benefits are taken. Total pension input is the increase in value of the aggregate of all the individual’s pension savings. The pension input period is usually the year to the anniversary date which falls within the relevant tax year.

High income

Where an individual has income of more than £130,000 he may be subject to a tax change known as the 'special annual allowance change' if his pension savings are more than £20,000 (including employer contributions) in the tax year 2010/11.

2011 and beyond

The annual allowance and lifetime allowances already announced up to 5 April 2016 are:

High income

From 6 April 2011 those with gross income of more than £150,000 will suffer a restriction of tax relief on pension contributions. For employees with income of more than £130,000, contributions to pension schemes made by their employer are treated as income for this purpose.

The restriction operates as a tax charge of variable rate called the 'high income excess relief charge'. This will erode the tax relief on any pension contributions made in the year, increasing the tax charge to 30% at £180,000 income.