Have you ever looked at your payslip and wondered where all that hard-earned money disappears to? Taxes seem to creep higher every year, and with allowances frozen, it’s easy to feel like you’re losing ground. Yet there’s one powerful tool that still offers real relief: your pension. As the current tax year draws to a close on April 5, there’s still time to make meaningful moves that could transform your retirement outlook.
I’ve always believed pensions represent one of the last genuine bargains in personal finance. The government essentially pays you to save for the future through tax relief, and right now, with deadlines looming, it’s worth paying close attention. Let’s explore how to make the most of these final weeks.
Why Act Before the Tax Year Ends?
The clock is ticking. Once April 6 arrives, several opportunities reset or vanish entirely. Unused allowances from older years disappear forever if not claimed, and potential changes in future budgets could alter the landscape. In my view, it’s better to secure benefits now rather than regret missed chances later.
Pensions remain one of the most tax-efficient ways to build wealth. Contributions get boosted by tax relief, growth happens free of income tax and capital gains tax, and you can often access 25% tax-free at retirement. With public finances under pressure, who knows how long these advantages will last in their current form?
Understand Your Annual Allowance First
Start here: the standard annual allowance sits at £60,000 for the 2025/26 tax year. This covers everything paid into your pensions – your contributions, employer payments, and even third-party ones. But it’s capped at the lower of that figure or 100% of your relevant UK earnings for the year.
Relevant earnings usually mean salary, bonuses, and self-employment profits – not investment income or dividends in most cases. If you’re earning less than £60,000, your personal limit matches your income. Exceed the allowance, and you’ll face a tax charge on the excess.
Take a moment to gather your figures. Check recent payslips, P60s, and pension statements. Many people underestimate how close they are to the limit, especially if employers contribute generously.
Pensions remain one of the most powerful long-term savings vehicles available, especially when you maximise the available reliefs each year.
– Retirement planning specialist
If you’ve already dipped into your pension flexibly, the Money Purchase Annual Allowance (MPAA) might apply instead, dropping your limit to £10,000 annually. This kicks in once you start taking taxable income from certain pension arrangements. Double-check your status to avoid unpleasant surprises.
Unlock Extra Savings with Carry Forward
Here’s where things get interesting. If you’ve maxed out this year’s £60,000 but still have cash to invest – perhaps from a bonus, inheritance, or savings – look at carry forward. This rule lets you bring unused allowance from the previous three tax years into the current one.
For 2025/26, the standard allowance was £60,000 in both 2023/24 and 2024/25, but only £40,000 back in 2022/23. That creates a potential maximum of £220,000 if you’ve barely contributed in recent years and have sufficient earnings this year to support it.
- First, fully use this year’s £60,000 allowance.
- Then draw on the oldest unused year first (2022/23 now).
- Any unused amount from that oldest year vanishes after April 5 if not used.
- You need to have been in a pension scheme during those prior years, but no contributions were required then.
One catch: personal contributions can’t exceed your relevant earnings in the current year. Employer contributions face no such restriction, which opens doors for salary sacrifice strategies. If you’re expecting a windfall, crunch the numbers carefully – perhaps with professional help – to avoid overstepping.
In my experience, many higher earners leave carry forward on the table simply because they haven’t reviewed old statements. Don’t let that be you. The end of this tax year marks the last chance to rescue unused 2022/23 allowance.
Claim Every Bit of Tax Relief You’re Entitled To
Tax relief is the magic ingredient. For basic-rate taxpayers, a personal contribution of £80 becomes £100 in the pension thanks to 20% relief added automatically. Higher-rate (40%) and additional-rate (45%) taxpayers get even more – but often need to claim the difference through self-assessment.
Some schemes handle everything via payroll – net pay arrangements or salary sacrifice – so full relief applies upfront. Others use relief at source, where basic relief goes in immediately and you claim extra later. Check your setup to ensure nothing slips through the cracks.
I’ve seen people leave hundreds or thousands unclaimed simply because they assumed the provider handled everything. A quick call or online check can confirm – and potentially unlock funds to recycle back into the pension.
Handle Bonuses the Smart Way
Bonus season often stretches into early spring. If you’re due one, consider sacrificing part or all into your pension. This reduces income tax and usually National Insurance too, making it incredibly efficient.
Employers frequently match or enhance sacrificed amounts, amplifying the benefit. Just ensure total contributions stay within your allowance – including carry forward if needed. It’s a win-win: more for retirement, less to the taxman.
- Discuss options with HR or payroll early.
- Calculate the net benefit after tax savings.
- Confirm it fits within your overall limits.
- Monitor the impact on take-home pay.
Perhaps the most satisfying part? That bonus works harder for your future self instead of vanishing into everyday spending.
Watch Out for the Taper if You’re a High Earner
If your income pushes above certain thresholds, the annual allowance tapers down. For 2025/26, the standard £60,000 starts reducing when threshold income exceeds £200,000 and adjusted income tops £260,000. It drops by £1 for every £2 over £260,000 adjusted, down to a minimum £10,000.
These calculations get complex quickly – involving salary sacrifice effects, employer contributions, and benefit accrual in defined benefit schemes. If you’re anywhere near these levels, professional advice becomes essential to avoid unexpected tax bills.
Some try adjusting income to stay below thresholds, but the rules tightened in recent years. Don’t guess here; get it right.
Other Practical Tips to Consider Now
Beyond the big moves, smaller actions add up. Review whether your pension investments suit your risk tolerance and timeline. Consolidate old pots if fees are high or tracking becomes cumbersome – but watch for lost benefits in final salary schemes.
Think about life changes too. A new job, marriage, or inheritance might alter your strategy. Pensions can accept third-party contributions, so family members could help boost yours if they wish.
Finally, document everything. Keep records of contributions, relief claims, and calculations. It saves headaches during self-assessment or future reviews.
As the deadline approaches, the key is action. Review your position today, calculate what you can afford, and move decisively. Your future self will thank you for the extra compound growth and tax savings secured in these final weeks.
Retirement planning isn’t glamorous, but getting it right now compounds powerfully over time. With pensions still offering strong incentives, why leave money on the table? Take control before April 5 passes – your retirement could be noticeably brighter for it.
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