The 2024/25 tax year finishes on April 5, so it’s well worth reviewing your pension now to make sure you’ve made the most of your allowances and any ways to maximise your retirement savings.
Pensions offer significant benefits, not least valuable tax relief on contributions, so it’s vital to check whether you might have missed any opportunities to boost your pension savings before the tax year ends.
Here’s our checklist to help you make the most of pension tax breaks before April 5.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation* with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
1. Can you top up your pension to maximise tax relief?
Pension savers are generously rewarded by the taxman for saving for the future, so you may want to consider paying a bit extra into your pension before the end of the tax year to benefit from tax relief.
For example, if you’re a basic rate taxpayer and you pay £80 into your pension, HMRC will top this up to £100, and if you’re a higher or additional rate taxpayer, you’ll receive even more tax relief on your contributions, which you can claim back through your self-assessment tax return. Find out more in our article How pension tax relief works.
This tax year (2024/25) you can claim tax relief on pension contributions of up to £60,000 or 100% of your income, whichever is lower. Find out more in our guide How do pension allowances work?
Emma Sterland, Chief Financial Planning Director at leading UK wealth manager Evelyn Partners, said: “Taking advantage of pension tax relief is now perhaps more important than ever. Not only is fiscal drag increasing the tax burden and pushing many earners into higher tax brackets, but we also have a relatively new government whose fiscal headroom is now razor thin, as well as a new pensions minister. Who knows what could happen to the generous system of pension tax relief, or to the recently-expanded £60,000 annual allowance, in the next few years?”
It’s worth noting that if you’re a high earner, the amount of tax relief you can claim is usually limited by the tapered annual allowance.
The tapered annual allowance affects anyone with a ‘threshold income’ above £200,000 and kicks in when their ‘adjusted income’ (which includes income from all sources, as well as any employer pension contributions) rises above £260,000. Once this happens, the high earner will see their annual allowance reduced by £1 for every £2 they exceed £260,000. Those earning £360,000 and above will be subject to the minimum tapered annual allowance of £10,000.
Ms Sterland said: “Even though the minimum amount that a high earner can contribute to pensions under the tapered annual allowance was raised to £10,000 from April 2023 (from £4,000), this still means they are very restricted in the amount of tax-relieved contributions they can make into a pension – at just a sixth of the amount of those not subject to the taper.
“Those caught up in these numbers should seek advice. If you think you’re subject to the taper but would like to maximise pension contributions for the tax year, then you really should speak to a financial planner because the calculations for adjusted and threshold incomes can be very involved – as can the possible steps to remain the “right side” of such thresholds.”
2. Have you used carry forward rules?
You may be able to pay more than your annual allowance into your pension using carry forward rules, if you haven’t made full use of your allowance in the previous three tax years. This can be a useful way of boosting your retirement savings and benefiting from tax relief, particularly as you approach retirement.
Bear in mind that although the annual allowance for 2023/24 and 2024/25 £60,000, for 2021/22 and 2022/23 it was £40,000. That means, assuming you haven’t used any of your annual allowance for the past four years, you could make a maximum contribution of £200,000, provided your relevant earnings in this tax year allow it (and subject to having had a personal pension in place already for those years).
Becky O’Connor, director of public affairs at PensionBee, said: “The carry forward rules can be particularly handy if, for example, you have received a sum from an inheritance that you would like to put into a pension, or if you have sold a property and want to invest the proceeds tax-efficiently, or if you are self-employed and had a particularly good year with a bit more than usual to set aside. However, even using carry forward, the amount of tax-relievable pension savings you can make in a tax year could only go up to your earnings in the year you make the contribution.”
Learn more about how carry forward works in our guide Pension carry forward explained.
3. Could you use Bed and SIPP?
You may have heard of Bed and ISA, but have you heard of Bed and SIPP? This is a similar process that enables you to top up your pension with investments such as funds or shares that you already hold outside a pension. The transfer process is known as ‘to bed’, hence the name ‘Bed and SIPP’. It involves you selling investments you already hold and then re-purchasing them within a pension wrapper. Beware, though, that the value of any investments added to your pension this way counts towards your annual allowance (see above). Ensure that you factor in your contributions out of income, too, so that you don’t breach your allowance.
There are several potential benefits to Bed and SIPP. You’ll benefit from tax relief on any investments you move into your SIPP, provided you have unused annual allowance. You’ll also be able to benefit from tax-free investment growth within your SIPP. Remember, though, that you will need to sell your investments to move them into the SIPP, and this could trigger a Capital Gains Tax (CGT) liability. This is the tax you pay on any profits above your tax–free annual CGT allowance, which is £3,000 in the 2024/25 tax year and in the 2025/6 tax year.
Read more in our guide What is Capital Gains Tax and how do I pay it? You will also be out of the market for a time, and may miss out on investment growth during this period.
4. Has your spouse used their allowance?
If you’re in a couple and one of you is a higher-rate taxpayer, they can contribute to the lower-earning partner’s pension – helping to maximise tax relief.
The contributions are treated as if the partner had paid the money in themselves, and they’ll receive 20% tax relief at source.
You can still contribute to your partner’s pension even if they aren’t earning, and they’ll still benefit from tax relief at the basic rate. In this case, you can make pension contributions of up to £3,600 each tax year into your spouse’s pension, or your spouse can pay into your pension on your behalf. You or they only have to pay in £2,880 and the State will top this up by £720. Find out more in our guide Can my husband or wife pay into my pension?
5. Last chance to top up missing State Pension contributions dating back to 2006
Making sure you have 35 years of contributions in your National Insurance record should ensure that you receive as much of the New State Pension as possible when you retire. If you’ve missed any years, you can buy these back in order to bolster retirement income, and there’s currently a window of opportunity to backdate contributions all the way to 2006 – but only until the end of the current tax year.
Myron Jobson, senior personal finance analyst at interactive investor said: “The State Pension rules are changing and from April 2025, you won’t be able to top up missing National Insurance years going back as far as 2006. Instead, you’ll only be able to go back as far as six years.
If you’ve got gaps in your record, now’s the time to buy back years – it could be the best investment you ever make.”
You can find out how much State Pension you’re on track to receive by requesting a State Pension forecast, which will show you how much you’re on track to receive based on your current NI record, and how much you’re likely to get if you continue working up to State Pension age.
Find out more in our guide Is it worth paying to top up your State Pension?
6. Have you overpaid tax on your pension?
According to latest HMRC data, a whopping £49,514,458 of overpaid pension tax was repaid between 1 October and 31 December 2024. This occurred because of people being placed on an emergency tax code when they took their first pension payment. Make sure you claim a refund for any tax you might be owed, as although you should be refunded any overpayment automatically by the end of the tax year, you might want to get your money back earlier.
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown: “HMRC has announced that from April 2025 it will automatically update tax codes for those who are on a temporary tax code and would benefit from being on a cumulative code. This means they’ll avoid an overpayment or underpayment at the end of the year. This is great news for those taking regular income from income drawdown, but the problem persists for those taking lump sums.
“In the meantime, you can take steps to mitigate this – for instance by making your first pension withdrawal a small one if possible. If you do get landed with a bill, then you can get it sorted quickly by filling out a form and getting your money back as soon as possible. Otherwise, you will get your money at the end of the tax year.”
Learn more in our article Have you overpaid tax on your pension? How to claim it back.
7. Used your pension allowance? Consider ISAs
If you’ve paid as much as you’re allowed into your pension this tax year, but you want any remaining savings and investments to be as tax-efficient as possible, it’s worth thinking about using your annual individual savings account (ISA) allowance if you haven’t already.
This tax year, you can put up to £20,000 into ISAs, and any returns will be free of both income tax and capital gains tax (CGT) It’s a case of use it or lose it with your ISA allowance, so any partf you haven’t used by the end of the tax year cannot get carried over into the next tax year. You can put your money into either a cash ISA, a stocks and shares ISA or an innovative finance ISA which invests in peer-to-peer lending – or you can choose a combination of these.
Learn more about ISAs in our guide Everything you need to know about ISAs and about the benefits and downsides of both pensions and ISAs in our article Is it better to save into an ISA or a pension?
A final thought…
Retirement planning can seem complicated, and it can be hard to know if you’re making the most of your pension savings, or whether you could be doing more.
You may want to consider professional financial advice to ensure your pension is working as hard as possible for you.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation* with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
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