How does tax work on my pension contributions?

There are valuable tax benefits of paying into a pension scheme. In return for longer-term savings, the government supports savers by giving tax relief on contributions. This means that money that would have ordinarily gone to the government is instead contributed to your retirement income, giving your retirement savings a boost.

Tax relief is calculated on how much you earn, which determines how much income tax you pay:

• Basic-rate taxpayers – Those who earn between £12,571 to £50,270 will benefit from 20% of tax relief
• Higher-rate taxpayers - Those who earn between £50,271 to £125,140 will benefit from 40% of tax relief
• Additional-rate taxpayers - Those who earn over £125,140 will benefit from 45% of tax relief

TPT operates the ‘net pay’ arrangement where your own pension contributions are deducted from your taxable pay before your tax rate is worked out. Your contributions are exempt from income tax when the money is paid to TPT.

Try the MoneyHelper contribution calculator to see the tax relief that may apply to your contributions.