A pension is a great way to save and invest your money for the future because you can get tax relief on the payments you make to your pension pot.
This means that the government adds 25% (more if you're a higher-rate taxpayer) to any amounts you put in, up to a certain limit. This limit is based on your annual earnings and capped at £40,000. You can also carry forward unused allowances for up to three years.
One of the great things about a Nutmeg pension is that we’ll automatically add the 25% government top-up as you make monthly payments into your pension pot – all out of our own funds.
If you’re a higher or top rate tax payer and able to take advantage of the higher tax relief, you can claim these additional amounts through your annual tax return form.
|If your income tax bracket is||And you contribute add||The government gov't tax relief is||To give you a total pension contribution of|
There is also a lifetime allowance with pensions. This is the upper limit on pension benefits you’re allowed to receive before you have to pay tax. The lifetime allowance is currently £1m as of 6 April 2016. Any amount above this is subject to a charge of 25% if paid as a pension or 55% if paid as a lump sum.
The lifetime allowance was reduced for this tax year from £1.25m to £1m. If you think your pension savings will be affected you may be able to apply for protection. Two types of protection are available: