YOU MAY HAVE TO PAY TAX IF YOUR PENSION SAVINGS ARE TOO HIGH!

If your pension savings are more than your annual allowance for the tax year, and you do not have unused annual allowances from the 3 previous tax years to cover the difference, you will have to pay tax on the excess.

You will get a statement from your pension provider telling you if you go above the annual allowance. If you are in more than one pension scheme, ask each pension provider for statements. This will help you work out how much you have gone above the allowance.  There is a calculator on the HMRC website.

As you can see from the above, despite the “simplification” of pensions back in 2015, the system is still extremely complicated. Nevertheless, saving in a pension is still very tax-efficient as for a higher rate taxpayer the net cost of saving £10,000 in a pension is currently £6,000.