How much can I contribute to a pension?

Most people under 75 are eligible to contribute as much as they earn to pensions including a SIPP (effectively capped at £245,000 in 2009/10 tax year). For instance if you earn £50,000 a year you can contribute up to £50,000 gross (£40,000 net) into all your pension plans combined in the 2009/10 tax year.

Following the 2009 Budget and Pre-Budget Report, anyone who has an income of £130,000 or more in this tax year or either of the previous two tax years may be subject to a 20% tax charge on pension contributions of more than £20,000 from 22 April 2009 onwards, effectively clawing back higher rate tax relief. Download our High Earners factsheet for more details.

For extra help in calculating how much you can contribute you can use our contribution and tax relief calculator.

The earnings on which you can base your contribution are known as Relevant UK Earnings. If you are employed this would generally be your salary plus any taxable benefits. If you are self employed, this would normally be the profit you make (after any adjustments) for UK tax purposes.

Even if you have no Relevant UK Earnings - maybe you are retired or not working - you can still contribute up to £3,600 each year to pensions. Of this the government will pay £720 in tax relief reducing the amount you pay to just £2,880.

Lifetime allowance - When contributing to a pension you should be aware of the lifetime allowance. This is set at £1.75 million for the 2009/10 tax year rising to £1.8 million in April 2010 when it will be frozen until at least the 2015/2016 tax year. If your pension fund exceeds the lifetime allowance when you take retirement benefits you are likely to incur a tax charge on the excess unless you have registered for protection. If you have a large pension fund and are unsure whether or not this will affect you please call 0117 980 9926 for more details.